TORONTO — For the last seven years, Jessica Carpinone has always been able to pay rent for the space her artisanal bakery and coffee shop Bread by Us uses in Ottawa.
This year is different. Come Friday, there will be no cheque in the mail, no wad of cash and no e-transfer that Carpinone will send her landlord.
"We pay close to $6,000 a month in rent and were able to meet that in April, but we're absolutely not able to meet that in May," said Carpinone.
"When we paid that in April it was after not operating for two weeks, so it was a really big hit to our cash flow. Some other big payments came through at that time and they put us in a position where it would be completely impossible or at best really not a good business decision to take what little we have left to pay rent."
The pandemic has meant a slew of commercial renters — from the country's smallest businesses like Carpinone's to the chains like A&W Food Services of Canada Inc. — have faced tough conversations with their landlords about being unable to cover rent.
Many tried to keep the payments flowing in March and April, when COVID-19 shutdowns were still fresh, but the pandemic's prolonged nature means that all has changed in May.
"I think it's going to be worse than April 1," said Tim Sanderson, an executive vice president and national lead of retail for JLL Canada, a brokerage firm that invests in industrial, commercial, retail, residential and hotel real estate.
Lots of businesses don't have the liquidity to carry them through for months on end, he said.
"And when you're looking at your list of things to pay, rent is usually a rather large nut."
Landlords are working out what to do about tenants that can't pay on a case-by-case situation, and most are hesitant to make blanket statements allowing all tenants to forgo rent because each one performs differently, he said.
Sanderson believes landlords are asking themselves if the tenant seeking a break on rent is a business that wasn't going to survive regardless of COVID-19.
"And am I, as a landlord, by deferring or abating rent, throwing good money after bad?"
RioCan, Choice Properties, and CT real estate investments trusts all said in early April that they were working with tenants who need support because of the financial challenges brought on by the pandemic.
Loblaw landlord Choice Properties REIT said it would grant 60-day rent deferrals on a case-by-case basis for "qualifying" small businesses and independent tenants.
Cadillac Fairview, which owns some of the country's highest profile malls including the Eaton Centre in Toronto and Pacific Centre in Vancouver, confirmed to The Canadian Press that between 20 and 25 per cent of its tenants have paid rent for this month and the company has deferred April and May rents for a "significant" amount of its retail clients.
Sanderson predicts top-tier malls will see some impacts around commercial rent, but will ultimately survive. Malls in second-tier markets will be more affected, he thinks.
Olivier Benchaya, a partner in the restructuring and insolvency group of Richter, said he's seen mall landlords allowing tenants to defer rent, but warns that even that situation creates the "perfect storm of financial strain" on businesses.
"You have to make up that rent at some point," he said, which might include interest and will likely come as tenants are still struggling to pay suppliers for delivered goods that can't be sold at full price.
Covering a backlog of rent and all the other mounting costs will be tough for small businesses that often have less cash on hands than their larger counterparts.
A recent survey from the Canadian Federation of Independent Businesses revealed that more than half of small businesses are not able to pay rent without support, and this number is as high as 75 per cent for the hospitality sector.
About 54 per cent of those surveyed trust their landlord to be reasonable, and 75 per cent believe the cost of commercial rent that cannot be paid due to COVID-19 revenue losses should be shared between governments, landlords and tenants.
Carpinone's landlord is willing to participate in the federal government's Canada Emergency Commercial Rent Assistance program, which provides forgivable loans to cover 50 per cent of three monthly rent payments.
The loans will be forgiven if the mortgaged property owner agrees to reduce the eligible small business tenants’ rent by at least 75 per cent for three months under a rent forgiveness agreement.
Details are still be working out, so Carpinone and her landlord will wait to find out more before pursuing it.
In the meantime, they have agreed to a rent deferral.
"To somehow have to turn a business that's already just a break-even business into something profitable so that I can repay them that extra $6,000, that stresses me out," she said.
"Basically, it's going to be another two weeks of me kind of white-knuckling and hoping for the best."
— With files from David Friend
This report by The Canadian Press was first published April 30, 2020.
Companies in this story: (TSX:REI.UN, TSX:CHP.UN, TSX:CRT.UN, TSX:AW.UN)
Tara Deschamps, The Canadian Press