Fixed or variable commercial rent – cool heads called for

Fixed or variable commercial rent – cool heads called for

As thousands of businesses enter uncharted waters post Covid-19, one of New Zealand’s most experienced property, tourism, hospitality, and business experts is calling for cool heads over coming months.

Adrian Chisholm, founder of New Zealand-wide business, says landlords and businesses need to work together in good faith to help stem the tide of closures and redundancies.

Advocating some “good old-fashioned common sense and sensible solutions”, the Queenstown-based businessman is speaking from 45 years of previous ownership of a wide range of tourism businesses and as a former landlord and tenant.

But currently without a foot in either camp, his independent ‘helicopter view’ of current woes advocates that commercial landlords and tenants may need to accept that rent is no longer a fixed but a variable cost for the foreseeable future.

“They need to accept they’re ‘joined at the hip’ and allow common sense to prevail,” he says. “In my opinion the solution is to adopt a Variable Rent Programme (VRP).

“Within 72 hours, tourism-related businesses went from being on steroids to full cardiac arrest. For commercial tenants, strangled by rental obligations in an environment where there’s no income, the outcome is obvious and disastrous.

“On the face of it the landlord may be protected by rental obligations and personal guarantees in leases, but in fact there’s little immunity from current business risk.

“Without a tenant paying rent or outgoings to cover rates and insurance premiums, there’s significant income disruption and potentially a prolonged period of vacancy.”

Adrian says landlords should be under no illusion that if good tenants fall over, there’s no queue of prospective occupiers, resulting in illiquidity and value erosion to the market value of the property.

“There’s merit in the argument that some rent is better than losing a good tenant and the prospect of no rent at all, and other options include Government-sanctioned bank loans which require approved cashflow statements and business plans which are currently nearly impossible to establish.

“What’s required is an open book process where the tenant pays an adjusting percentage rent to turnover.”

Adrian says this works by the business’s actual percentage turnover being confirmed at the end of each calendar month, perhaps by an accountant, and that proportion applies as the adjusted rent payable for the following month.

“This continues until the tenant gets back to the prescribed rent in the current lease. It’s a process that’s well advanced in Australia,” says Adrian.

The transparent process of the “open book” rental calculation being certified could potentially be done using the free services of the Regional Business Partner Network.

Adrian says that historically, market rents for accommodation, hospitality and retail tenancies were firstly assessed by direct comparison ($/sqm or $/room) but they also needed to fit within a framework of perceived affordability.

“What that means is that rents also needed to represent an acceptable percentage of turnover or net income. Ultimately a prudent tenant will only offer a rental that is deemed to be sustainable and a landlord will accept this necessity if they wish to lease the premises.”

Accommodation rents generally equate to around 22% – 28% of expected turnover, food and beverage/hospitality business rents generally equate to 6 – 8%, and retail percentage turnover rents vary widely, depending on the business sector.

Most current leases have a ‘ratchet clause’ that holds rent at a certain level and may need to be restructured to provide an acceptable level of certainty and confidence for both parties to remain committed and further invest in the premises.

“The ratchet clause is a draconian blunt instrument that should be history,” says Adrian. “Some landlords are putting their heads in the sand if they think otherwise while tenants aren’t sleeping at night if they’ve got this hanging over them.

“Another consideration is whether the landlord has enough protection from losses. Where the business is insolvent, the guarantor is insolvent and there’s little goodwill in the business. Then the landlord and the lessee are truly joined at the hip because both are facing losses.

“If the lessee and guarantor are sound and the lease has value (such as a good motel), then landlords can happily dig their heels in and expect full payment. There’s little financial motivation to make concessions.

“We also need to separate lessees who have a cash flow problem against lessees with a viability problem. Cash flow problems can be solved by deferrals, but viability problems call for agreed reductions.”

For a full outline of the issues and solutions go to:

For further information:
Adrian Chisholm
Director, Tourism Property Brokers Limited t/a
Email: [email protected]
Mobile: 021727888


Read More

Stars of golf, cricket and rugby to shine at free Queenstown community event

Stars of golf, cricket and rugby to shine at free Queenstown community event

A star-studded team featuring legends of golf, rugby and cricket will line up against some of Queenstown’s best cricketers as a curtain raiser for this year’s 101st New Zealand Open.

The free community event kicks off at 4.30pm on Sunday February 23 at the Millbrook Cricket Ground near Arrowtown, with families and sports lovers encouraged to bring a picnic and enjoy the atmosphere.

Held for the second year running and sponsored by Rebel Sport, sports ambassadors in Queenstown for the 101st New Zealand Open who will swap golf clubs for cricket bat or ball include Beauden Barrett, Israel Dagg, Stephen Fleming, Jeff Wilson, Chris Harris, Matt Guyatt and Peter O’Malley.

International cricket umpire and former New Zealand cricketer Chris Gaffeney is also picking up the bat again for the celebrity hit-out.

For the first time a handful of young up and coming Wakatipu High School cricketers get to play their heroes in the Queenstown All Stars team.

They include former All Black Justin Marshall’s cricketer son Lachlan and students Seth Mawhinney, Angus Herron, Gabe White and Jordan Gibbons, alongside six other players from the local T20 league.

Sir Ian ‘Beefy’ Botham, one of the greatest all-rounders in cricket history, and injured local golfer Ben Campbell will be coaches and non-playing captains, while the formidable brothers’ duo Glenn (cricket) and Greg (golf) Turner will umpire.

The match will be a T10 format with10 overs a side and is expected to last about two hours, come rain or shine. It will be MC’d by local sports personality and radio presenter Craig ‘Ferg’ Ferguson.

Rebel Sport will help keep it fun with activations and giveaways on the day.

The 101st New Zealand Open presented by Sky Sport, will be held at Millbrook Resort and The Hills from 27 February to 1 March 2020.

Read More

Sudima Hotels to Open New Property in Queenstown’s Five Mile Precinct

Sudima Hotels to Open New Property in Queenstown’s Five Mile Precinct

One of New Zealand’s most sought-after tourism and leisure hotspots is getting a brand-new hotel to meet increasing demand for high quality accommodation in Queenstown.

The 4.5-star hotel at Queenstown’s popular Five Mile precinct, set to open in the 2021-22 summer season, will operate as Sudima Queenstown and add to Sudima Hotels’ current portfolio of four hotels (Auckland Airport, Rotorua, Christchurch City and Christchurch Airport) and two more due to open in 2020-21, Auckland City and Kaikōura.

The property is owned by Clearmont Group, developer of the mixed-use Five Mile retail and business centre. Director Craig Greenwood says that after over four years in the planning they’re “delighted” construction has started on the signature four-storey ‘Armadillo’ building which completes the entrance to the Five Mile centre.

“In choosing a hotel operator we felt we needed a brand which delivered a quality experience at an affordable price, and we believe Sudima Hotels fulfils these brand values,” he says. “The hotel will also have a conference centre, meeting a need identified by our business customers, and there will be a further 2700m2 of retail on the ground floor.”

The building was designed by Queenstown’s JCY Architects director Richard Chambers and his team, inspired by the rugged geological strata of the area and developed in close collaboration with Clearmont Group and Sudima Hotels.

“The building will complete the retail loop of the centre with a lobby on the ground floor accessing the hotel above. The palette of materials developed from previous buildings on the site includes weathering steel, warm timber-like tones on the upper levels and board-marked concrete panels with timber soffits.”

Construction by Naylor Love began earlier this month, with the company’s regional manager Greg Boland saying they were proud to have worked with Five Mile from the start of the development.

“The design team has put a lot of time into making sure that the new hotel ties in with the look and feel of the rest of the development, and we’re looking forward to delivering a stunning building that fulfils their vision,” he says.

Sudima Queenstown at Five Mile is close to Queenstown Airport, major ski fields and main routes north and south. The hotel will feature 120 guest rooms (king, twin and family), a restaurant and bar with alfresco dining, four meeting and conference rooms and ski storage. The décor will have natural finishes throughout to complement the beauty of the surrounding landscape.

Sudima Hotels is an award-winning leader in the New Zealand accommodation and hospitality sector. Last year it won three New Zealand Tourism Awards, taking home the Supreme Tourism Award, along with the Environmental and Employer of Choice awards.

Sudima Queenstown is set to open as a single-use plastic free property, built to a standard that will enable certification to carboNZero status as soon as possible. This will further bolster Sudima Hotels’ reputation as a leader in sustainability, diversity and accessibility.

Sudima Hotels CEO Sudesh Jhunjhnuwala says, “We’re thrilled to be announcing a new property in Queenstown, and proud to be chosen by the Clearmont Group as their hotel partner as they further augment the already successful Five Mile precinct.

“We set out to provide exceptional customer service in a welcoming and unpretentious manner and strive to be industry leaders in social and environmental responsibility. We look forward to progressing our mission and pushing ourselves forward with the opening of two new hotels this year and Queenstown a couple of summers from now.”

About Sudima Hotels

Sudima Hotels is a New Zealand hotel brand that is passionate about and committed to delivering environmentally friendly and accessible hotels in New Zealand. It is an industry leader in setting sustainability benchmarks, having achieved the first carboNZero certification for a New Zealand hotel, and initiating a movement within its group of hotels to become single-use plastic free by 2020. All its hotels are accessible and have been rated between Bronze and Platinum for accessibility by Be. Lab.

Underpinned by strong values that centre on caring, doing the right thing and working together, Sudima Hotels focuses on helping guests make the most of their day. Both corporate and leisure travellers will feel welcome and be greeted with a smile at Sudima Hotels.

Sudima Hotels current locations include Auckland Airport, Rotorua, Christchurch Airport and Christchurch City. It has hotels under development in Kaikōura, Auckland City and Queenstown.

Sudima Hotels is owned and managed by Auckland-based entrepreneur and property investor Sudesh Jhunjhnuwala.

Read More

Medigrowth New Zealand plans Central Otago medicinal cannabis business

Medigrowth New Zealand plans Central Otago medicinal cannabis business

A Central Otago-based company is forging ahead with plans to develop a medicinal cannabis cultivation, research and manufacturing business in the heart of wine country.

Medigrowth New Zealand, based in Cromwell, plans to provide pure and safe New Zealand-grown cannabinoid medicines to a market that recent research shows is “crying out” for alternatives to existing pain medications.

Queenstown businessman Aaron Murphy has been joined by Medigrowth Australia directors Todd McClellan and Adam Guskich in the New Zealand venture.

The Australian company was established in 2017 and brings its invaluable expertise, IP and experience to the local operation, established last year.

Aaron Murphy, who operates award-winning accommodation and property management services in Queenstown, says “the time is right” for Medigrowth’s launch.

“A law change in December 2018 paved the way for a regulated medicinal cannabis industry in New Zealand, with licences to be issued by a new Medical Cannabis Agency, application submissions from April 1,” he says.

“We’ve been working closely with New Zealand GPs on education initiatives, many of whom we know are being asked by increasing numbers of patients to prescribe medicinal cannabis but don’t currently have the training or knowledge to do so.

“Myself, Todd and Adam are all firm believers in the benefits of medicinal cannabis and the opportunity to deliver substantial improvements in patient health and wellbeing.

“We’ve identified a site for a world-class research and development facility on the outskirts of Cromwell which we already know is a fertile and fantastic growing region.”

The facility will offer state-of-the-art technology in extraction and manufacturing, cultivation, laboratory services, genetics supply and University-led research.

“There are many opportunities to partner with like-minded businesses in the region and utilise the skillsets of existing horticultural experts to create more jobs and opportunities for the area,” says Mr Murphy.

“We’re offering a genuine ‘seed to solution’ commitment to New Zealand patients and industry partners, and are working on licencing for the Ministry of Health on licences to cultivate medicinal cannabis and manufacture medicinal cannabis products.”

Current partners include specialist medical device and pharmaceutical consultancy Pharmout, experts in manufacturing practice.

“We’re currently raising capital for the business and are already talking to a number of businesses and individuals keen to invest in Medigrowth New Zealand,” says Mr Murphy.

“We’re also excited  to hear from potential partners intending to cultivate medicinal cannabis to meet projected demand and who require extraction and manufacturing services.”

Medigrowth is hosting two, free, workshops to help educate medical professionals on why and how to prescribe medical cannabis. The first will be on March 9 in Auckland and the second on March 14 at the Bannockburn Polytechnic’ main campus.

The workshops are open to GPs, registered nurses and specialist doctors.

The ‘Practical Skills in Prescribing Medicinal Cannabis’ workshop has been endorsed by the Royal New Zealand College of General Practitioners and approved for up to 6 CME credits.

The workshops will be co-hosted by Australian based GP Dr Teresa Towpik, who has been advocating for medical cannabis since it became legalised. She will be accompanied by well-respected Auckland-based GP Dr Graham Gulbransen – who is also a strong advocate for medical cannabis.

Register online here:

Further information about Medigrowth can be found at

Read More