An economic disaster awaits retailers and suppliers in Europe due to the outbreak of Covid-19

An economic disaster awaits retailers and suppliers in Europe due to the outbreak of Covid-19

An economic disaster awaits retailers and suppliers in Europe due to the outbreak of Covid-19

The curfews and the total closures imposed by governments in European countries to curb the outbreak of the new Corona virus have forced large retailers such as H&M to default on the payment of rent for their branches, and there is a major threat ahead for the real estate and banking sectors within the continent.

In a report, US Bloomberg monitored Corona's impact on the future of real estate companies that own stores and malls, in light of their dependence on funds that manage the pensions of millions of savers and retirees, there is a risk that real estate will lead to a wider financial crisis again. ”

Over one trillion euros ($ 1.1 trillion) in debt has been secured for commercial property in Germany, France and the UK alone, and interest is to be paid on approximately 180 billion pounds ($ 224 billion) of commercial property debt in the next few weeks.

"Since the crisis affects everyone, we must join hands," said Helena Helmerson, CEO of H&M in an interview, noting that nearly 4,000 of the company's 5,000 stores are closed.

According to reports, British retailer Debenhams Plc may move to appoint managers early next week to protect itself from creditors.

The company said in a statement that the company's management is making contingency plans "with a view to protecting business."

On the other side, two of the largest real estate owners in Britain said they collected less than 40% of the rent due in this quarter.

The British Real Estate Association estimates that the total monthly rental bill for March for UK retailers and operators is around 2.5 billion pounds.

Owners will face severe income shortages if most retailers withhold rent in stores that they cannot operate, making it difficult for real estate companies to pay the interest due to banks.

Melanie Leach, BPF CEO, said real estate companies need to be flexible in terms of rentals and support the faltering retail industry that employs millions of people across Europe.

She also pointed out that it is important to pay attention to the fact that real estate companies have "obligations and obligations towards lenders and investors, who represent the savings and pensions of 45 million people across the country."

Many European countries are legislating to pause interest payments temporarily, and in the United Kingdom, government support has focused mainly on tenants while reducing real estate taxes and wage assistance.

David Barry, senior manager of debt counseling at Jones Lang La Salle, said lenders are dealing extensively with calls from existing borrowers seeking exemptions.

In an analysis of the most important shopping malls in the UK by Case College Nicole Lux research fellow, he said that a 10% drop in rents could lead to a funding shortfall of around 6 billion pounds.

Intu Properties Plc, the largest owner of a shopping center in Britain, was already struggling to raise capital and reduce debt before the outbreak of the new Corona virus.

The company said it had received only 29% of the rents owed for the past quarter and warned that it would take strict steps against any chains withholding unilateral payments.

“We have neither the desire nor the financial ability to fund international brands with good capital who have decided that they do not want to pay their rent,” Anto said.

Many prominent retailers across Europe angered real estate owners and politicians by withholding rents despite taking advantage of emergency government support, as H&M and Adidas AG have sparked criticism in Germany by seeking concessions on their rents while planning for action. An emergency many in the country believe should be used to support small businesses that are least able to withstand the crisis.

German Finance Minister Olaf Scholes described the behavior of the sporting giant “Adidas” as “annoying”, and Adidas has since slumped, paid its rent and apologized.

"We made a mistake and lost a lot of confidence," Adidas said, adding that the work was not working normally anywhere in the world "even we cannot tolerate that for a long time."

Across Europe, the continent's largest retail property owner was supposed to collect around 1.4 billion euros of rent in the last quarter.

"This is a serious situation," H&M spokeswoman said in a statement. "We are now carefully evaluating all activities in the company, including the costs and risk perspective."