Tesla’s rent refusal riles landlords

The man set to be the world’s first trillionaire is taking advantage of UK government measures to protect struggling businesses and refusing to pay rent. Elon Musk’s Tesla continues not to pay rents, despite having a market cap of more than $250bn (£199bn) and some $8.1bn of cash in the business. The refusal of such well-capitalised businesses to meet rental obligations is frustrating landlords. Government announced a wide-ranging three-month moratorium on rents in March and has since extended it to 30 September, with another extension expected. Andrew Jones, chief executive of LondonMetric, said it was an “injustice” that well-financed businesses were able to avoid paying rent.  Although LondonMetric collected 95% of its rents in the second quarter, Jones said that several big companies still refused to pay. Tesla is one of those brands, and one of LondonMetric’s largest individual debtors. The business, which turned over $6bn in the first quarter of 2020 – a year-on-year growth of 32% – occupies a site in Weybridge, Surrey. Jones said that he, like many other landlords, is happy to agree rental relief for businesses that are genuinely suffering during the downturn, but he is unwilling to allow businesses that are able to meet their obligations to sidestep them. Alongside Tesla, Mike Ashley’s Frasers, Boots and JD Sports are all refusing to pay rent. Boots has been trading throughout lockdown while JD Sports recently posted record profits of almost £350m on a turnover of more than £6bn. “There is massive disappointment that some large, well-capitalised retailers, who clearly can pay, are deciding not to,” said Jones. “While we recognise this has been a challenging time, that is not their prerogative and we have a legally binding contract which we will enforce. We simply cannot transfer value from our shareholders to theirs without due compensation.” He added: “We are very happy to assist fragile and vulnerable tenants where we can but the debt due from well-capitalised companies will be fully recovered. As Warren Buffett once said, you can’t unsign a contract and so best to do all your thinking before you sign.” Instead of the blanket moratorium, Jones reckons government should put perimeters on the amount of rent that occupiers can sidestep and take the capitalisation of the business into account. He cites the Welsh government’s approach to rates relief as an example, where only businesses with a rates bill of up to £500,000 are entitled to the relief.