Mar 30, 2020
Deichmann, H&M and Adidas: More retailers stop paying rent
Mar 30, 2020
More and more well-known retail companies are holding back rent payments in Germany after being forced to close their stores in the fight against the coronavirus pandemic. Big name brands including Deichmann, H&M and Adidas are announcing such measures under a new federal law that seeks to mitigate the financial impact of the Covid-19 outbreak on businesses, according to a survey from DPA released on Friday. Real estate association Haus & Grund has criticised retailer’s “one-sided approach”.
Federal Transport Minister Andreas Scheuer (CSU) said that Adidas’ decision to stop paying rent was completely unacceptable. “I am very disappointed,” Scheuer told Bild. The group has made significant profits. The move will not only hurt large property companies but also independent landlords.
Germany's largest shoe retailer, Deichmann announced that it will stop all rent payments for its 1,500-strong store estate from April until stores are allowed to open again. “This is a preventive measure to safeguard the company's financial position,” said a spokesperson in Essen. He added that the company respects the government’s measures to fight the virus, and that the goal is to curb the financial impact for everyone involved.
Swedish fashion chain H&M has also stopped rent payments for 460 stores across Germany. The company informed landlords about its intent last week, a spokeswoman said, adding that the brand will seek to find a “mutually acceptable solution” with landlords.
Sportswear manufacturer Adidas is doing something similar. “It’s true that Adidas, like many other companies, has temporarily suspended rent payments where our shops are closed. We are in close contact with all landlords concerned,” said a spokeswoman on Friday, confirming a report from Bild.
Retailers’ unilateral approach has been met with criticism from some landlords. The president of real estate association Haus & Grund Germany, Kai Warnecke, warned that Adidas’ new rent policy should not set a precedent. "If so, it would be the end of the real estate market,” he warned, urging tenants and landlords to work collaboratively to find workable solutions.
The provisional rent freeze is made possible by a rescue package announced by the Bundestag and Bundesrat to deal with the impact of the coronavirus crisis. Among others, it includes a provision that temporarily shields tenants from being evicted during the period from April to June if they experience financial hardship due to the coronavirus. The period could be extended further. But for companies, it doesn’t mean they can stop paying rent, just that payments can be deferred.
A spokesman for the Federal Ministry of Justice emphasised that the new regulations do not exonerate tenants from their obligation to pay rent. It only limits landlords’ right to terminate a lease if tenants haven’t paid rent for three months due to the Covid-19. Landlords still have the right to ask courts to check tenants’ ability to pay.
Whilst Deichmann, Adidas and H&M are taking advantage of these new opportunities, other chains are hesitant. German fashion manufacturer Gerry Weber said it is still considering whether such a decision was a sensible move for the business. Textile chain C&A said it was in contact with landlords to find solutions. “We believe that the effects of this difficult situation should not only be shouldered by retailers, but everyone involved, and thus also by landlords and property investors,” said a company spokesman.
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