River Rat

There are so many moving parts in the economic equation that it will be hard to make a call. I see this as another key uncertainty and I recently saw a note from PWC which examines 3 different scenarios for the economy a V, U or L shaped recovery this might be useful input for our own scenario planning.

This is where we are on our matrix and I have summarised some of our thoughts into rules or uncertainties. I really think that our poll will help so I am going to try again. I also think we should let the commentary run and I will pick it up midday tomorrow and update where necessary.

I like your thinking but let's extract a few things from it. We expect a spike in activity immediately after lockdown ends but we don't now how much. We expect an economic impact on our customers but we don't know how severe or for how long.These seem like key uncertainties would you agree?

That's the beauty of scenario planning it forces you to recognise that you don't have all the facts (key uncertaintities). A wait and see which way the wind blows is a perfectly good decision but understanding the impact of a key uncertainty in terms of a scenario prepares you for action when a key uncertainty becomes a rule of the game.

For discussion today is the customer behavior post lockdown and for how long that could be in effect. I tried setting up a poll but had a technical glitch, what I have seen is a poll that CNN reported on which showed that only 37% of respondents saw themselves going back to their normal shopping and travel patterns with 63% said that they will adapt these because of the virus. However, I do think a focused Bikehub poll would provide us with sufficient input to have confidence as a rule of the game. So I will try and get the poll up and running.

A summary of where we are in terms of the rules of the game. 1. Tenants are unable to pay their rents and the number varies from 0 -50% during the lockdown or directly thereafter. 2. Tenants are renegotiating their lease. 3. The banks are willing to renegotiate the terms of the loans. 4. Lockdown will be in effect to at least 16th April 5 Not all tenants will survive the lockdown. 6 We can expect some intervention from government. 7 THe entire property sector is in the same situation as us.

Interesting to see how some of our earlier discussion is playing out in real life. https://www.fin24.com/Companies/Retail/life-after-lockdown-a-steep-climb-for-shopping-malls-20200403

Hold that thought for when we start talking about options in step 3. As for the property forum remember this is a fictional business and I have tried to structure it in a manner that allows us to make inputs and decisions without looking for guidance from a third party, so no we're not members. However, your point is absolutely valid in a real scenario a national forum would be vital to creating industry wide initiatives.

The one thing we are starting to see is that the past won't be a sure predictor of the future. Everyone from Government, to Shareholders to employees are recognizing that there is a new reality emerging. What we are doing here is trying to layout what that new reality could look like and plan accordingly. If it makes you feel any better, of the 4 organisations I chair 3 of them have decided not to pay a dividend but to use the cash to keep the ship afloat. The 4th is a NGO so the dividend question is not an issue at all. In the case of the 3 all the directors are shareholders so it's effectively the owners making the sacrifice and it is not a hard sell at all.

The idea of this thread is to make this business a proxy for all other businesses and to keep it real at this stage the shareholders recognize that if they don't address the loan issue first they will lose their investment and this will be their last dividend. They're business people and not a charity they want to make money now and in the future.

The idea of scenario planning is to try and provide some guidance to the questions you pose with recognition of the uncertainty that confronts us.

The question is simple we need to present our strategy to the bank to renegotiate the terms of our loans. We are purely focused on this business only, my ulterior motive is to demonstrate scenario planning as a tool for any business and hopefully this will help us all through these uncertain times.

Hold that thought for when we develop the scenarios.

That certainly applies to the supermarket but what about the restaurants or hairdresser. Will the office usage be the same or will WFH have an impact. Will the supermarket shift it's business model to making home deliveries which means less shelf space and more warehousing. We don't know and that's why I am suggesting a survey to test the market.

You might have spotted the slight of hand here that I made the LSM applicable to the shopping centre the same as the Bikehub! But let's test this with a survey, I think the information will be invaluable.

Okay we've made good progress with two subjects that haven't been fully explored namely customers future behaviour and how long the virus will have an impact. I am going to suggest that we do a survey on the Bikehub to test customer behaviour during the day tomorrow and hopefully this will guide our conversation tomorrow. Like it or not the commentary on this thread will continue and I will use this where applicable to create an agenda for tomorrow's session again at 18h00. But to summarise the overarching conclusion is that the rule of the game is everything is going to be renegotiated.

It looks like we are developing a rule that says customers behaviour post lockdown will not be the same but will it be a permanent change or just while the virus is around?

Okay think we quickly found ourselves with one prevailing rule that this not a legal fight, virtually everything contractual is up for negotiation with a win win mindset. This really does change the power dynamics between the banks and it's customers, between landlord and tenant. It's fascinating. Government and tax is a bit tricky because as pointed out most of what we have seen to date is short term and focused on basic needs. We are yet to see a real economic plan so this feels like it will be a key uncertainty for some time. I would to get your thoughts on the socio or customers dynamics, during lockdown their behaviour is dictated but what happens after lockdown? I can't see it as business as usual and thoughts?

You're in an interesting space here, both sides could go legal but if all the tenants find a loophole and don't pay, the landlord will default on the loan and the property will eventually fail as a going concern. That's why I am suggesting that the rule of the game is forget what's written in the contract but accept that you have to keep the tenant alive and he has to keep you alive. It's effectively a renegotiation on all contracts.

That looks like a rule.6. The entire property market is in the same position as ours and a sale in execution will be avoided by the financiers.

Exactly government intervention is a reality our problem is that what the will do is a key uncertainty that they will is certain.

I think we have to accept that legally we have the high ground in that tenants are renegotiating because they realise they won't be able to fulfill their obligations. We can try and keep them to it but we'll both lose in the process. That's why the renegotiation is a rule.

Agreed let's see if we can develop these into rules.

Due for renewal 2023.

From the comments two additional rules. 5. We will lose tenants. 6. Government will intervene.