Major commercial landlord put St. Albert small business at risk of bankruptcy

One of Canada's largest real estate investment trust companies put a small St. Albert business at risk of bankruptcy by consistently delaying payments totalling more than $25,000.

David Niebach, owner of Herc's Nutrition located off the St. Albert Trail, said their landlord RioCan Real Estate Investment Trust owed them $28,000 in lease allowance payments dating back to January.  

"If RioCan continues to delay payments like they have here, or not defer any further rent, then they're effectively (putting) us out of business," Niebach said last week, before the payment was issued. The money has since been paid on April 3.

A tenant improvement allowance is the amount a landlord is willing to spend so their tenant can retrofit or renovate the space, usually expressed in a per-square-foot or total dollar sum. 

The nutrient supplement store opened in November 2019, and expected to break even over the next few months. Then COVID-19 hit, sales dropped and the business was left scrambling to afford its expenses. 

Because of COVID-19, the store had no income coming in, and wasn't eligible for any of the provincial or federal supports aimed to keep businesses afloat through the pandemic. The $28,000 owed was a lifeline, Niebach said. 

"We're not eligible for the (Business Development Bank of Canada) money because we're 'too new.' We're not eligible for the $40,000 loan because we didn't have enough payroll last year. Honestly, we're not eligible for anything," he said. 

"It's just ... we're a small business start-up. We employ one person. We're St. Albert residents, and now we've been put in a place where we have absolutely no cash flow, and all these great announcements don't apply to us. A lot of small businesses don't have any access to capital right now."

Paid months later

Valeria Villatoro, associate property manager for RioCan, said she had taken over the Herc's Nutrition file in mid-February from a previous property manager.

When Niebach first requested the money back in November, she said the former manager noted the lease was not fully executed at the time because of a few small outstanding issues, which put a halt on allowance payments.

 After the lease was executed on March 18, Niebach said RioCan continued to stall the payments.

"Honestly, I think they were just playing games trying to delay the payment as much as possible." 

Then when the pandemic hit, RioCan, which is worth $14 billion with 3.6 million square metres of leasable space, said it was offering an automatic 60-day interest-free rent deferral for independent commercial tenants who have asked for relief, to be paid back over a year.

However, there was a catch. Niebach said he was told by RioCan's head office in Toronto they wouldn't be paying the allowance owed until the small family-owned business started paying rent again in June or July.  

"First of all, you've owed us this money since January, long before COVID-19. We have no help whatsoever, and now the little bit of money we could potentially use, you're not giving it to us," he said. 

Villatoro said RioCan's head office in Toronto told her they had concerns about the tenant possibly skipping out on the business if they paid the allowance after getting two months of rent deferred.

"I said to them, no, I don't think that will happen, the owner has put a lot of money into the space. So then they expedited it, and I'm glad he got it on Friday," she said. 

"Should he have gotten his money earlier? Definitely."

Now that the $28,000 has been paid, Niebach said the business will survive, for now.

Much of the future remains uncertain, but he said the business is working on other angles to get access to additional funding through the federal government.