Reporting to you live from Saskatchewan; stay tuned for more economic spinoff from the COVID-19 pandemic! By spinoff, I mean spinning off the tracks, or wheels, or whatever analogy you’d like to utilize.
The Saskatchewan government delivered its budget three months late in mid June, with a big fat $2.4-billion deficit ribbon on top. It’s a gift no one wanted and we can’t return to sender.
The deficit is primarily being blamed on reduced provincial revenues, along with all the costs associated with the pandemic. According to finance minister Donna Harpauer, the budget was balanced and on track prior to the global upset caused by COVID-19.
The overall budget will see an increase of approximately seven per cent in spending, totalling $16.1 billion.
It’s not hard to do the math when projected revenue is estimated to be down eight per cent, or $13.6 billion overall, thanks to the untimely collapse of economies worldwide and oil prices continuing to tank.
Pandemic response swift but pricey
Spending on the pandemic in Saskatchewan is being estimated at $700 million. This includes adjusting budgets with an additional $148 million for affected ministries and their response plans.
Approximately $118 million was spent on additional equipment for hospitals and testing, as well as increased PPE.
A total of $200 million has been earmarked in a contingency fund for a possible second wave later this year.
The rest of the costs just keep adding up; money for shelters, caregivers, livestock producers, you name it.
Why does it seem, then, that commercial real estate landlords have been overlooked?
Landlords left in limbo
The announcement of forgivable loans for commercial rent assistance has proven to be fairly unfruitful. Not only does the program have a long list of qualifying questions, but the process puts responsibility on to the landlord to apply, in addition to accepting a significant loss in income.
The provincial government issued a moratorium in March on all tenant evictions.
Landlords holding multifamily investments have been put in an especially hard predicament. Tenants that were possibly already behind have snuck under the radar and can remain for the time being, while falling further behind in their payments.
It’s certainly discouraging to hear people are unable to pay rent, as the federal government stepped in very quickly to get emergency response benefits to anyone who qualified.
Time will tell
For commercial tenants unable to generate revenue and landlords unable to service their debt, it seems almost a waiting game to see the extent of the prolonged damage.
Commercial investors without mortgages are in the most enviable position, as they will feel less of the sting from delinquent rentals.
Many landlords we deal with tried to get ahead of unpaid rentals by offering deferrals, allowing tenants to pay back rent interest-free over an extended period of time.
This is a good solution for all parties, but the landlord is still left holding the empty bag if the tenant permanently closes their doors.