Coronavirus: Rents exacerbating problems for shuttered businesses

In the second half of 2019 Akis and Jackie Shokkos were running a successful business in Larnaca, hoping they would soon be able to repay the bank loan they took out to acquire it.

Their popular Wow Action Park for children turned over €60,000 a month by the end of the year and the start of 2020.

That was before the coronavirus. Today, their income is zero, and like many other businesses in Cyprus, they are staring at financial ruin.

While the government has stepped in to help with staff salaries, businesses still have to pay rent, loan instalments, utilities and other expenses.

They were granted a reprieve after loan repayments were suspended across the board for nine months, until the end of 2020.

But when it comes to rent there was no such relief. In common with other tenants, they rely on their landlords who, to be fair, may have their own financial problems.

The tax break granted by the government to landlords who reduced rents during the first lockdown did not really take off.

And a one-off state payment to businesses to use for rent and operating expenses did not even make a dent, Akis Shokkos told the Sunday Mail.

The €6,000 he received did not really do anything, considering the rent for the place is €6,500 per month.

Shokkos said he needed to make €45,000 per month just to break even.

From March until December, they were able to open for four months, July, August, September and October. Their revenue was nowhere near break-even point but the overheads still rose. In the four months he opened, Shokkos burned through his savings to keep going.

“How can you pay when you don’t have cashflow?” he said.

Shokkos paid 10 per cent of his turnover during those months towards rent. But his landlord still wanted the rent in full.

He tried to find common ground, a compromise that would be fair to both sides.

The landlord went to court to get the around €50,000 owed to him. In the meantime, he secured a court order banning Shokkos and his staff from entering the premises. So now they also had legal expenses on top of everything else.

“We cannot move out; we don’t want to move out,” he said.

He said it was a bit unfair for the landlord to expect full rent when the business is closed because of government decisions.

“He is right, but we are also right.”

It is not a problem that the Shokkos couple alone face. Businesses have called on the government to follow Greece’s example and subsidise part of a stricken entity’s rent.

The chairman of the federation of the association of hospitality venues Phytos Thrasyvoulou said the sector has collapsed because of the lack of substantive support from the state.

Thrasyvoulou urged the government to extend the suspension of loan repayment and intervene on the issue of rents. He also said the state should guarantee low interest loans to businesses so that they can cover their operating expenses.

The federation also wants local authorities to step up and support the businesses within their boundaries.

The government has said that legislating on the matter of rents would be unconstitutional as it would be intervening in private contracts. There are also doubts whether Greece’s decisions are in line with EU rules on state aid.

The Cypriot government has instead decided to grant businesses a one-off sum to help with the rent and operating expenses.

It also announced a fresh support package on Saturday, including direct grants to businesses, payroll subsidies, tax breaks, rent relief for the first two months of the year, and extension of the loan repayment moratorium.

For some however, it may already be too little too late.

In a post on Facebook, the owner of Art Café 1900 in Larnaca Marios Dianellos told President Nicos Anastasiades he could have the keys to his establishment, blaming the government for ruining his business.

“What am I going to do with them?” he said. “We don’t need them. Closed for five months and people prohibited from sitting inside for another five; you have ruined us.”

Dianellos said the utility bills were stacked on the fridge and the bank details of the building’s owner were next to the till for whoever takes the business owner to pay the rent due.

“Also, inside the large fridge at the bar, all the beer and food are expired, to be binned,” he said. “And please tell them to keep the staff; they are good lads, honest, hardworking, and penniless now.”