‘Mutual success or no success’: Real estate readies for moratorium expiry

Real estate-related business casualties have risen ahead of this month’s looming expiration of the commercial rent moratorium, even as landlords work to devise new ways to support struggling tenants. Analysis by EG shows that at least 20 High Court applications for CVAs or administration appointments were made in May by medium-to-large firms with exposure to the property sector, accounting for around 15% of a 134-strong list traditionally dominated by small company insolvencies. This compares with four filings out of 124 lodged in April.  High street and hospitality venues in London fared the worst. Businesses including restaurant and bar operator Drake & Morgan and food hall operator Market Halls both filed for CVAs, while Willow Corporate Management, which operates the Nobu Hotel in Shoreditch, has filed to appoint an administrator. Some of May’s filings are already being dealt with by judges, including legal action against car park operator NCP’s restructuring plans. Its first court hearing took place last week, with a full hearing scheduled for later this month.  A legal challenge to the restructuring of coffee shop operator Caffè Nero is also set to go to trial next month. Other high-profile hearings in May included cases relating to high street retailer New Look, salon operator Regis and gym group Virgin Active. The British Retail Consortium has warned that two-thirds of UK retailers face legal action in July once the moratorium on evictions and debt enforcement ends. The BRC’s survey, which polled 24 respondents accounting for more than £12bn in turnover and 5,000 stores, found that 30% face county court judgments from commercial landlords. An 80% majority said that some landlords have given them less than a year to pay back arrears accrued during the pandemic. But other landlords and industry leaders have argued that reality is more nuanced. At Grosvenor Britain & Ireland, the team is finding innovative ways to work alongside tenants, including making an equity investment in luxury fashion label and occupier Roland Mouret.   James Raynor, chief executive of Grosvenor, told EG: “By and large, you have a huge level of support from the property industry to its tenant base. “Overall, the industry has been incredibly supportive – I would challenge you to find one other industry that has helped another industry in the pandemic to the same effect. Good landlords know that well-occupied properties with viable businesses are much better than empty buildings.” He added: “I don’t think there is a great fear that landlords will suddenly clamp down on tenants – you have to remember it’s not in landlords’ interests to force tenants into difficult situations, but occupiers should also, when they or their shareholders can – and plenty of them can – fulfil their obligations as well.  “There are many reasonable people out there who understand it is mutual success or no success.” Melanie Leech, chief executive of the British Property Federation, said: “It is disappointing to see the BRC failing to recognise that the vast majority of property owners and tenants have already reached agreement on rent. Let’s not forget either that there remain well-capitalised retail businesses exploiting the moratoriums, refusing to engage with property owners or pay any rent.”  As part of its submission to the government’s call for evidence, trade body UKHospitality found that 40% of its members have not been able to reach a deal with their landlords on rent concessions, while 52% had not been granted any rent extensions. The latest figures from Remit Consulting show that March collection rates in the leisure sector were down by 15% on the previous quarter. However, the research also showed that landlords have received 67.7% of March rents due from high street shops, marking a 21.8% jump on the previous quarter and an 18.7% increase from September last year. To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews Image © Guy Bell/Shutterstock