It’s a bold strategy Cotton, let’s hope it works out for them
This might seem like a hard but fair response – if you take out a lease on a property and the terms state that you’d pay back a regular amount on an agreed date in return for being able to rent the premises – then that’s what you do.
The National Residential Landlords Association (NRLA) are already appealing for guidance as many members are reporting that tenants are under the impression that they can cease paying rent due to the pandemic.
Coincidentally, some of the major remaining UK high street retailers including Primark, Burger King, B&Q, Topshop and JD Sports have decided to take the bold step of announcing that they too, don’t feel like paying and consequently they wouldn’t be paying their regular quarterly rent when it comes due this month.
The coronavirus lockdown is already affecting commercial landlords significantly.
Two of the largest in the country – Intu and Hammerson – announced that they had received just 29% and 37% respectively of their total quarterly rents due and had been “deluged with requests for rent deferrals, cuts or waivers” from their tenants – the majority of whom have been forced to close their own establishments.
Under normal circumstances this might have been met with a little more understanding but for Intu especially, this collapse in income couldn’t have come at a worse time.
The group, which owns such flagship locations as the Trafford Centre in Manchester and The Metrocentre in Gateshead, was already in danger of breaching loan covenants due to being unable to refund excessive debt and losing a significant portion of its rental income could prove terminal.
Intu’s Chief Executive Matthew Roberts confirmed the business was in urgent talks with its lenders about waiving some of the conditions on their owed debts.
If the value of its property portfolio continued to fall it could be forced to make immediate repayments of £143 million while even a 10% fall in their rental income would trigger demands for an additional £34 million.
Intu said it had £184m available in cash and loans as of 24th March so the situation is serious to say the least. To compound this the ratings agency Fitch downgraded their status even further yesterday.
Asking for a statutory demand
This existential funding crisis explains why Intu are not playing when it comes to their response – threatening hold-out landlords with statutory demands for payment.
A spokesperson said: “We’re happy to engage with customers on a case-by-case basis, but we have neither the desire or financial capacity to bankroll, global, well-capitalised brands who have just decided they don’t want to pay their rent”.
“Our approach will be the same to any UK brands who behave in a similar way, not least because they are beneficiaries of significant financial support from the government.”
If you imagine the UK economy as being put together like a jigsaw puzzle then the Covid-19 Coronavirus pandemic outbreak and response has taken it and thrown it up in the air.
Some pieces may land more or less where they were and can be reincorporated with a minimum of fuss but for others, it’s a battle to avoid being swept away altogether.
We’ve gathered together all the latest information and support that small and medium-sized businesses can access right here but like puzzle pieces, every company is different with their own concerns and questions about the weeks and months ahead.
Our team of experienced advisors are available to connect with you right now.
After you contact us, they can arrange a convenient free virtual initial consultation with you to find out exactly what your situation is and how you can best approach overcoming it.
We can then work together to produce a roadmap to give your business the best chance to survive then thrive as well all look to put the pieces back together again.