Reporting to you live from Saskatchewan, stay tuned for more economic spinoff from the Covid-19 pandemic!
And by spinoff, I mean spinning off the tracks or wheels or whatever analogy you’d like to lend.
The Saskatchewan government delivered their budget three months late 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.
Reduced revenue coupled with rising costs
The deficit is primarily being blamed on the reduced expected 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 alone 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 been earmarked in a contingency fund for a possible second wave later this year.
The rest of the costs, well, they just tally up. Money for shelters, caregivers, livestock producers, you name you 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 forces responsibility onto the landlord to apply in addition to chewing a significant loss in income.
The provincial government issued a moratorium in March on all tenant evictions.
Landlords holding multi-family 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 getting 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 that qualified.
Time will tell
For commercial tenants unable to generate revenue and landlords unable to debt service, it seems almost a waiting game to see what the prolonged damage is.
Commercial investors without mortgages are in the most enviable position as they will feel less of the sting from delinquent rental.
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.
Posted by Kelly Macsymic