The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian realtor says the VAT Department sought to get “blood from a stone” by rejecting pleas from commercial property landlords to switch to cash-based filings/payments at COVD-19’s peak.

David Morley, Morley Real Estate’s president, told Tribune Business the sole difficulty he had encountered on behalf of landlord clients was the refusal by the Department of Inland Revenue’s (DIR) VAT unit to temporarily move away from accrual-based payments and filings given the uncertainty over whether tenants would pay their rental bills.

Describing it as the only government agency he dealt with that had proven “uncooperative” in working with the business community during the pandemic’s height, Mr Morley is predicting a “12-month recovery” before business volumes return to pre-COVID-19 shutdown levels with commercial property landlords continuing to provide “concessions” to struggling tenants.

He added that he had extended his recovery forecast by a further three months as landlords continue to focus on retaining long-standing tenants amid the wait for tourism’s rebound, forecasting that the Bahamian economy’s woes will last for at least 15 months when the three-month lockdown is factored in.

“The only thing I had difficulty working on was VAT,” Mr Morley recalled of the CVID-19 lockdown period. “A couple of clients had to do their VAT filings on an accrual basis based on what they had billed not knowing whether the tenants had the ability to pay.

“We asked for a temporary reprieve and to be able to file on a cash basis. Their [VAT Department’s] position was: ‘No. You have to file on an accrual accounting basis, and if the company cannot pay they have to do one of two things. Go to the shareholders of the company and ask for them to cough up money to pay the VAT or make a payment plan’.

“I said: Look, these landlords cannot get blood from a stone. Why should the VAT Department be able to do that? It’s like asking Super Value or a food store to pay for products on the shelves before the customer buys it. They said that was not an exact comparison and didn’t like it.”

Mr Morley said the request by himself and his clients was ultimately denied, and he added: “They’re the only government department I feel was not co-operative and helpful in this situation. It is what it is. I don’t envy government. We didn’t expect this crisis but we’re all in this together. If we all work together we will get through it and succeed on the other side.”

Mr Morley said mall, retail and commercial office space owners were still maintaining a delicate balance between tenant woes and generating sufficient cash flow to pay their own costs such as insurance premiums and real property taxes.

“The last three months, I think on the whole landlords and tenants have worked things through, and I think tenant retention was very successful,” he told this newspaper. “There were a couple of instances where tenants threw in the towel and said no matter what concessions you give us, we cannot work with anything as we have no income.

“I thought it would be a three-month shutdown and nine months of recovery, but now I think it will probably be a 12-month recovery before we see on the economic side the volumes we would have been experiencing prior to the shutdown. I think you’re looking at a complete 15-month period.

“Now we’re seeing businesses back open, landlords are continuing with concessions to the tenant. But, at the same time, we are all hoping between now and Christmas we can ramp down concessions as the economy ramps back up.”

Mr Morley said the rental discounts provided by commercial landlords had varied. Those tenants forced to close had frequently been offered 50 percent off their lease payments, while those able to offer drive-through, curb side or home delivery services had seen their bill reduced by a lower 25 percent.

“Any concessions that the landlord has given now are far less expensive than what it costs the landlord if they lose tenants in this period and have to replace them in terms of lost revenue,” he added. “But not all tenants are alike.

“You had banks, food stores and pharmacies that were essential businesses that never closed, and never had concessions granted to them. Some of the restaurants had drive throughs, and they didn’t get the same level of concessions as businesses shut down altogether.

“Most landlords gave 50 percent concessions to those businesses that had to be shut down, whereas drive-through businesses got a 25 percent concession. It was really sitting down with those tenants and showing appreciation for the long-standing relationship, helping them stay in business while the landlord pays the long-term operating expenses. You still have to pay your insurance premiums, pay your property tax.”