Collaboration — it is a word that is so often bandied about these days that it seems to have lost its meaning. But whether in the context of the WFH debate, finance arrangements, family Netflix viewing choices, rental discussions or England’s Euro 2020 midfield pairing, the truism that “collaboration” is a key ingredient for success has never been more relevant. In essence, we succeed better and quicker by also helping others to succeed.
This has, thankfully, been at the heart of our investment rationale since EPF’s inception — an ethos of partnership, working in collaboration with our tenants. On regular weekend trips to his warehouse as a kid, my grandfather used to say “keep your suppliers well fed”; and whilst his trade was one of football pin-badges and memorabilia long before such items flooded our club shops, the same has always applied to our approach to property ownership.
Symbiotic relationships
The past year or so has provided challenges and demands for us all — a near-apocalyptic climate where all of the typical rules of engagement were simply ripped up. And if you believe the press (excluding the trade press, of course), landlords deserve what they get because we are all merely cigar-chomping, pin-striped barons whipping tenants like serfs. This could not be further from the truth; property owners are every man and woman on the street through our pensions, local authorities, charities and so on. And, in most cases, property owners and tenants work hard to find mutually viable solutions. The moratorium on rent evictions merely emphasises this, as typically it is only the major chains refusing to engage with property owners and a minority of aggressive landlords being the bad apples.
But the period has also brought to the fore some tremendous examples of collaboration, with relationships forged and/or cemented. Such relationships are crucial for symbiotic success when it comes to property investment. The auction room has always provided a wonderful platform to employ this investment rationale. While major REITS, institutions and billionaire owners will typically favour ostensibly “strong” covenants, for us as a private investor the fundamental tenet has always been a combination of location, rent affordability/lettability and, crucially, the operator themselves – not the number of units they occupy across the globe, but the style of business, ethos and the character of the captains at their helm.
This strategy has served us well, particularly given the flood of CVAs and restructuring schemes that have been the go-to method for private-equity-backed behemoths to extricate themselves from contractual obligations. By contrast, independent operators will not serve a 150-page complex legal document on your desk at 6.30pm on a Friday with a 9am Monday deadline for response. For independently owned businesses and private chains, restructuring involves a phone call or coffee with us and a handshake once we’ve agreed the symbiotic solution.
Direct line
Last month, a retail property in Kent that we acquired at auction a few years ago, provided a delightful example of this. I was called by a tenant – a nail salon that has been in occupation for six years – to request a payment plan to assist it following yet another enforced closure. The tenant was barely asking for any help at all – not much more than a delay – and the agreed payment plan took about 30 seconds; but as our conversation developed, it became clear that the tenant wanted an extension to its existing lease term. The site is strong; in an affluent market town with high demand and low supply, a location that a supposedly ”strong” multiple would snap up. But we did not hesitate to agree — and our tenant in the next-door unit jumped at the chance to extend as well.
It is not an exclusive trait to independents. The multiples/chains within our portfolio have also behaved with utter respect, empathy and understanding, seeing our relationship as the priority. Just like us, such tenants don’t ‘take the mick’ when the times are good, but only ask for help when they need it. Tenants with mindsets like these are worth far more than any credit rating.
Looking ahead, I cannot wait to get back to the auction room. That snapshot of market dynamics, uniquely presented in a dedicated physical presentation of demand. What will we be targeting? You guessed it: strong, alluring towns and tenants that know their stuff. And the first thing I’ll do after any new acquisition? As ever, introduce myself to the tenant, have a coffee with them and give them my direct line.
Adam Coffer is managing director of EPF Group
