Hospitality operators warn leasing arrangements will not save them
More than 85% of London-based hospitality operators do not consider their existing or new leasing agreements with landlords to be good enough to help them survive trading restrictions, according to research from Cedar Green.
In addition, 69% of the 230 firms surveyed said they were being forced to explore restructuring or insolvency options, while 38% of respondents reported that they had managed to agree new terms with the majority of their landlords.
“Many landlords still need to get their heads out of the sand and recognise that Covid-19 has changed the game for the long term. This isn’t a 6-12 month issue,” David Abramson, chief executive of Cedar Dean, said.
More than 85% of London-based hospitality operators do not consider their existing or new leasing agreements with landlords to be good enough to help them survive trading restrictions, according to research from Cedar Green.
In addition, 69% of the 230 firms surveyed said they were being forced to explore restructuring or insolvency options, while 38% of respondents reported that they had managed to agree new terms with the majority of their landlords.
“Many landlords still need to get their heads out of the sand and recognise that Covid-19 has changed the game for the long term. This isn’t a 6-12 month issue,” David Abramson, chief executive of Cedar Dean, said.
“We’re seeing more CVAs, many of them unnecessary, because there is currently no mechanism for commercial rents to be revised down in the rent review process.”
Tom Kidd, director and co-founder of Adventure Bar, which has nine bars around central London, added: “I don’t think people fully appreciate the magnitude of the fallout that’s still to come. Up to 80% of the hospitality sector is locked in a Mexican standoff when it comes to rent renegotiations. If the commercial eviction ban does end on 31 December, as much as 70% of the industry could be out of business early next year.
“Companies are using CVAs to force landlords’ hands. But that’s not good for the taxpayer – whether it’s written taxes or writedowns on pension funds, the general public don’t do well either way.
“The government could look at reform to the law around frustrated leases, and there is a strong case for mutual break clauses, giving both operators and landlords the option of terminating agreements that didn’t work for both parties without bringing down the whole company. We are facing a financial timebomb, so why not look at every avenue?”
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