Oaks Hotels, Resorts & Suites, part of the international Minor Hotels group, manages a swag of CBD and inner-city towers including Festival, Felix, Casino Towers and Aurora.
It emailed unit owners this week to say it would stop paying them rent from April 1 because of COVID-19.
Only two weeks ago it advised it would be forced to slash minimum rental returns 15-30 per cent as travel bans slashed AirBnB and other short term holiday bookings.
The move has already seen desperate owners turn to long-term rentals.
One award-winning Toowong real estate agency, Xperience Realty, said it had fielded 50 inquiries this week from CBD owners wanting to switch to long-term tenants.
“We’re unlike almost all other suburban agents in that we have a large database of CBD unit owners and can help them out,’’ Xperience principal agent Vish Uttam said.
“There are only three or four agencies operating in the CBD but it’s fortunate I started my career selling those apartments, so we have a large database.’’
The announcement by Oaks came as the CBD was about to enter one of its busiest periods of the year.
“We have exercised our force majeure right and will cease payment of rent to you from the 1st April 2020 for the duration of the COVID-19 force majeure event,’’ Oaks said in the email.
“As soon as the COVID-19 force majeure event subsides we will recommence paying the full rent...
“For the period of the COVID-19 force majeure event (that is, where you are not receiving the rent) we are prepared to enter into a revenue share arrangement with you.
“For the foreseeable future, the additional (travel) restraints will cause business trading conditions to materially deteriorate further, with conditions only to improve once such restrictions are lifted and life starts to get back to normal.
“At this time of the year we would be expecting to see occupancies of around 80 per cent and getting ready for a busy school holiday period.
“But with the governments restricting travel and asking families to stay at home for the school holidays, our hotels will mostly likely operate at occupancies of around 20 per cent.’’
Mr Uttam, whose agency won this year’s REIQ small residential agency of the year award (after also winning the award in 2018) said they were trialling a range of innovative online techniques to keep revenue turning over.
This included using Skype, Facetime and Zoom to show home buyers properties, now that open houses and inspections were banned.
His firm also was using 3D cameras which gave prospective tenants a realistic virtual walk-through experience, much like Google Streetview.
“We’re also using docusign, so people don’t have to come in to sign documents, we’re livestreaming and are working on short videos for tenants so they can understand their rights and obligations easily,’’ he said.
“We had already started doing some of these things, like video inspections, before COVID-19 so we had a head start over other agencies.’’
Mr Uttam said although revenue from house sales had dropped, he was hopeful rentals and the new technology would ensure Xperience emerged stronger than ever from the crisis.
“I’ve made a promise to my staff that I would keep them all on — they’re like my second family,’’ he said.
“We might have to cut hours or cut salaries, but I think we could emerge stronger than ever if we can pick up income from CBD rentals.’’