Canada Emergency Commercial Rent Assistance Program and Large Employer Emergency Financing Facility
On Friday April 24, 2020, the Federal Government and Prime Minister Justin Trudeau announced information relating to the Canada Emergency Commercial Rent Assistance Program (“CECRA”). CECRA for small businesses provides relief for small businesses experiencing financial hardship due to COVID-19. It offers unsecured, forgivable loans to eligible commercial property owners to:
- reduce the rent owed by their impacted small business tenants
- meet operating expenses on commercial properties.
Property owners must offer a minimum of a 75% rent reduction for the months of April, May and June 2020.
Today, May 20, 2020, the Federal Government and Prime Minister Justin Trudeau provided an update on CECRA. Full details about the CECRA can be found here.
To qualify for CECRA for small businesses, the commercial property owner must:
- own commercial real property which is occupied by one or more impacted small business tenants;
- enter into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%; and
- ensure the rent reduction agreement with each impacted tenant includes a moratorium on eviction and a declaration of rental revenue included in the attestation.
NOTE: Properties with or without a mortgage are eligible under CECRA for small businesses.
Furthermore, to qualify for CECRA for small business, an impacted small business tenant (including non-profit and charitable organizations) are those that:
- pay no more than $50,000 in monthly gross rent per location;
- generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level); and
- have experienced at least a 70% decline in pre-COVID-19 revenues (compared year over year with April-June 2019 or with January and February of 2020).
The CECRA for small businesses application portal will be available May 25, 2020. The Prime Minister has urged landlords to apply if they and their tenants are eligible for CECRA. With CECRA for small businesses, commercial property owners will still collect a portion of their gross rent. For example, for an impacted small business tenant paying $10,000 per month:
- CECRA for small business will cover 50% of the rent ($5000);
- The impacted small business tenant will pay 25% of the rent ($2500); and
- The commercial property owner will forgive 25% of the rent ($2500).
The Federal Government has indicated that they are working on new supports for larger retailers that do not qualify for CECRA for small businesses. McLennan Ross will continue to monitor these new measures and provide all necessary updates.
On May 20, 2020, the Federal Government and Prime Minister Justin Trudeau also provided more information on the Large Employer Emergency Financing Facility (“LEEFF”). LEEFF is a program that will provide emergency funding support for large Canadian enterprises facing financial challenges in light of the economic impact of the global COVID-19 pandemic. Complete information about LEEFF can be found here.
LEEFF will be available to large Canadian employers who:
- have a significant impact on Canada’s economy, as demonstrated by having significant operations in Canada or supporting a significant workforce in Canada;
- can generally demonstrate approximately $300 million or more in annual revenues;
- require a minimum loan size of $60 million; and
- are not involved in any ongoing insolvency proceedings.
LEEFF is open to large commercial businesses in all sectors (except those in the financial sector) and certain not-for-profit businesses such as airports. However, Companies that have been found guilty of tax evasion are not eligible under the program.
It should be noted that the loans provided under LEEFF are not forgivable and comes with conditions attached. The companies receiving the loans must, among other things:
- disclose their climate action plans and sustainability goals; and
- must not pay their executives “excessive” salaries;
Finance Minister Bill Morneau said the program is not a "bailout" and said the program has built-in safeguards for taxpayers — including a requirement that large companies that borrow money give the government the option of taking an ownership stake or provide a cash equivalent of 15 per cent of the principal amount.
Large enterprises that meet the qualifying criteria for LEEFF may begin an application by completing the online enquiry form here and sending it to firstname.lastname@example.org. LEEFF will remain open while the current economic situation persists.
Additional information about the LEEFF program is expected to surface in the coming days. McLennan Ross will continue to monitor these new measures and provide updates.