Drapers’ Reset Fashion Retail Crusade examines how stores and owners can cope with the backlogs in hiring that accumulate under repeated closings.
Fergus Patterson, Gant’s general manager for Northern Europe, says we’ve never been afraid to pay for big hires. For example, we pay a lot of hires on Regent Street, but big hires are paid for big strides and big sales. If you don’t get them, it’s a problem.
“Covid-19 is not the fault of the owners or my fault as a retailer. “
Patterson’s comments are at the center of the developing retail rental debt crisis, in an unprecedented situation where many retail outlets have been closed, in some cases up to 12 months, and neither party is to blame, who pays and how?
Property control firm Remit Consulting estimates that unpaid advertising engagements since March 2020 reached 2. 2 billion pounds after bill payments in the December quarter, representing slightly more than part of all unpaid advertising debts for the period. . December recovered seven days later, generating a quarter of rent arrears of 630. 8 million pounds.
The question is not when, but whether stores can [pay their rent arrears]
Tom Houghton, H Expansion Director
But the figures for giant institutional homeowners seem even worse: the owner of British Land’s grocery shopping center raised only 46% of their rent by the December quarter. By the time this story was published (February 1), it had collected only 72% of the revenue. for the September quarter, 73% of June procurement and 49% of March 2020 procurement. Meanwhile, Landsec’s offices in central London collected only 29% of the hires for the December quarter and only 36% were obtained from retail tenants. According to Hammerson, only 41% of the UK’s advertising rental debt has been recovered.
This heap of debt will only accumulate as “non-essential” retail outlets remain closed across the country under national closures in the UK and Ireland.
The backward point would possibly have accumulated after the government introduced a moratorium on default rental evictions in March last year, which is expected to last until the end of March this year. flow, while cutting a key lever for landlords to tax rent collection and their own income.
Now that revenue has stagnated largely for many classic stores and owners, while non-essential retail establishments remain closed, the question remains how those liquidity-challenged companies can take on the development of arrears.
The British Property Federation (BPF), the British Retail Consortium (BRC) and Revo jointly insisted that the government intervene in April 2020, suggesting an area subsidy scheme without permission in which retailers, owners and the state can only price constant property on a mobile scale. But the government has shown no interest in this solution.
Taking matters into their own hands, many stores and homeowners have come together to verify and reach mutually appropriate agreements to divide the bill. But this is not true for all parties, as corporations on both sides of the debate still refuse to have interaction in discussions almost a year after the start of the first lockdown.
Dominic Curran, BRC’s director of genuine real estate policy, estimates that stores have reached an agreement with approximately 80% of homeowners, a figure widely accepted through stores and homeowners contacted through Drapers.
Many owners have been incredibly pragmatic, fair and flexible in the face of declining sales in stores.
David Butler, CEO of Crew Clothing
However, the nature of these agreements varies significantly and many of them will most likely want to be reviewed without regard to the latter blockade.
For many, the answer was the percentage of the pain, as stores pay part of the rent during closings, but some have made an additional effort by accepting a full rental vacation for an explained period. when store sales have been re-covered, or to extend the end date of rentals to cover months that stores currently cannot afford.
Another option is the removal of lease breakout clauses, to ensure longer occupancy of stores, while some homeowners dive into store depots to cover unpaid rentals.
However, transactions in many factors.
Curran explains: “One store asked for a 50% reduction to lock and they were given the agreement of all owners, then another in the price aspect did the same and the owners said no. It’s very varied and is based on the relationships, locations, the type of store the owner wants to have in their portfolio, the owner’s monetary scenario, and the flexibility they think they can give. “
Crew Clothing CEO David Butler acknowledges this in the relationships and cases between stores and owners: “Many owners have been incredibly pragmatic, fair and flexible in reflecting declining in-store sales or the monetary pressures of stores. However, a significant minority refused to dedicate or be flexible.
“The downside is that, for many retailers, there is a debt bubble that, in some cases, will not be imaginable to be amortice and will become a failure. “
Warns that Covid-19 has blown up the classic style of long-term leases and only hiring reviews, and noted the growing desire for “partnership relationships between the two parties”: “In some places, the asset is no longer the value it is for the landlord or tenant, and that is necessarily where the sector is today; many on both sides do not wish to settle for this reality.
As an owner, I don’t need to feel like I’m giving a lease to a store and yet they’re starting to negotiate again.
Fergus Patterson, Northern European CEO, Gant
For Gant, the technique to check the percentage of the blockage pain. Patterson says the maximum owners have been sympathetic: some provide uncontracted periods in exchange for short-term lease extensions, while others, where they have rotating hires, have given up to a minimum. hire promises so that no rent is paid in the event of a freeze.
“Trust will have to be on both sides,” he insists. As an owner, I wouldn’t need to feel like I’m giving a lease to a store and yet they’re usually starting to negotiate again. responsibility, if any, with percentage data to make it happen that attendance is declining, to show that revenue is declining. We can point out online because we’re doing well there, so we know it’s a support challenge and not a product challenge. “
Mark Williams, director of regional retail owner Rivington Hark, agrees: “You must have a point of honesty and transparency for this association with paintings. Then paint with them on a case-by-case basis: adapt the result to the transparency of the discussion. »
But some other developer and owner of a regional mall reports that “some stores that can pay and pay [but haven’t]” reported very bad behavior: “I think getting paid as part of the rent when you’re stuck is probably as smart as an owner can expect This shows a real sharing of pain.
As the moratorium deadline approaches next month, landlords will soon begin legally enforcing the payment of notable debts, where no agreements have yet been reached.
The owner continues: “The debts that have accumulated are not viable and not all will act reasonably. When other people start acting unreasonably, you see an infection. It’s like game theory. “
“Without further clarification, direction or orderly solution through government, it will be an absolutely bloody mess. “
And stores express these fears and call for more clarity from the government. Tom Houghton, H Expansion Director
You can temporarily reach a scenario where a hiring den of 25,000 euros is matched through legal fees
Dominic Curran, Director of Real Estate Policy, British Retail Consortium
“We have had many positive conversations with our owner partners, however, there are times when we have not succeeded in an agreement.
“It is imperative that [the government] provide more clarity on how to deal with the arrears of unpaid rents focused on affordability and justice. It is unfair that tenants are 100 percent guilty of hiring an era of forced closure. “
“We appreciate that many of our proprietary partners have their own obligations to lenders and banks, which are tied up unless they in turn get relief. Remuneration is intrinsically related to commercial conditions. “
Patterson agrees: “I would like the government to take a more proactive stance with landlords and tenants, to force them to regroup. Defer hiring through the moratorium technically we still owe that money. “
“In terms of cash, it’s smart for us, but it only increases everyone’s debt burden. I would like the government to propose anything that says it will be shared in a responsible manner.
Another main fear of stores with back debts is that maximum rents involve provisions for interest payments in the event of a delay, which is added to their bills.
Some have also been subjected to County Court (CCJ) sentencing letters threatening to take legal action for unpaid rent. Action can only be taken after the moratorium is lifted, and the cards are widely used to force stores to sit at the negotiating table, but involve the owners’ willingness to start recovering losses.
CURran of BRC explains that the stores experienced an accumulation in CCJ stock after the initial extension of the moratorium until the end of December 2020, and the owners knew they would have to wait longer before they could claim their debts. stores is that when you start a CCJ, the store also becomes guilty of the owner’s legal fees. “You can temporarily reach a scenario in which a rent den of 25,000 euros is matched through legal costs. “
One owner explained: “If a store absolutely refuses to interact with you, I think it’s perfectly within your right to post a letter before acting. What are you trying to do?
They will be much more powerful economic partnerships
Melanie Leech, Executive Director, British Property Federation
With nerve tensions now under construction before the moratorium deadline and many shops and owners are back at the negotiating table to verify and succeed in the agreements to cover the latest blockade, it is transparent that the way the two sides have behaved with each other the pandemic will describe long-term relationships across the industry.
The founder and CEO of Jojo Maman Bébé, Laura Tenison, accepted “with gratitude” the donations of free hiring periods or the waiver of secure hiring during the locks, made through their owners, but has avoided any resolution of postponing hiring or renewing other leases, opting instead to pay owners in full, because the total rental bill has been reduced and “I take my rental obligations very seriously. “
But he warns: “Having an intelligent reminiscence and having a moral technique for business surely works either way. The homeowners who have supported us will be the first ones we will pass on to [when we are for new sites]. “
“People will see their behavior,” says Melanie Leech, CEO of GMP.
“The result will be much more powerful economic partnerships between those who have been good to others, either from the beginning or in the end. But there is also a deterioration in relations between a minority on both sides that is perceived as misbehaving. in both cases.
What is certain is that stores and owners have a massive impediment in front of them, and an impediment that can lead to landslides on both sides if they don’t place the media with each other and paint together. The coming months will be very important to navigate this crisis, however, even once this existing debt is resolved, the question remains how to design long-term rents to address the new truth of the retail industry that remained behind the pandemic.
“If there’s one smart thing that can arise from demanding situations [for homeowners and occupants with advertising assets] it’s that it brought other people together in a discussion of a guy that’s never happened before and probably late,” says Mark Robinson. , co-founder of Ellandi Mall owner and president of High Street Taskforce. “I hope we can use this crisis to chart a new sustainable path for the way we do business in the future. “
Having an effect on traders having to deal with maximum occupancy prices at a time of industry slowdown is evident in the wave of administrations, CVA and task cuts, however, owners also warn that they have a significant effect on city centers if rents and no service fees are charged.
Mark Williams, CEO of regional retail owner Rivington Hark, warns that some homeowners may be forced to close grocery shopping centers if prices rise to keep them up to date: “People are perfectly forgetting that if we don’t get rent or service charges, those centers will close, resulting in more task losses. “
He adds: “This has serious consequences, it’s just the immediacy of getting the rent, it’s the paralysis of the owners who are the investors and developers of the downtown areas. This will cause inland cities to decline beyond the point where they can recover. In many cases, the public sector will have to take the lead in offering a compensatory budget to boost the regeneration of urban centres because the personal sector is on its knees: it has no cash due to the loss of rent. “
Melanie Leech, executive director of the British Property Federation, acknowledges that landlords “have lost a lot of cash to tenants and will lose more tenants who unfortunately are unsuccessful, so there is less cash for developments. “exacerbated by the fall in the price of advertising asset portfolios because rental securities cannot be guaranteed.
“It will take time for those corporations to recover,” he adds. ” Especially those that are very exposed to retail. “
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