Landlords have criticised several large retailers for failing to pay rent during the coronavirus lockdown, as a growing number gear up for legal action against tenants.
LondonMetric is preparing to start legal proceedings against Boots, which has largely stayed open as a retailer providing essential goods and has paid rent on just one of its two stores in the landlord’s portfolio. The retailer is owned by Walgreens Boots Alliance, which has a market cap of nearly $40bn (£32bn).
Boots confirmed it has paused some payments, and written to a number of its larger commercial landlords to discuss options for rental and service charge payments. It has closed around 60 stores as well as most of its opticians and hearing care outlets.
“We wish to work together with our landlords to reach a fair agreement that supports Boots as one of the UK’s essential businesses at this time,” stated the company.
Chief executive Andrew Jones told EG that LondonMetric was happy to help the “more vulnerable” companies struggling to pay rent, but added: “There are a lot of well-capitalised companies that have the capacity to pay their rent. They have reported big profits and paid out large dividends and so can’t simply expect a rent reduction or rent-free period.”
Jones said LondonMetric will help companies with rescheduling rents, monthly payment plans or “win-win” asset management deals, but that outright non-payment is “just not acceptable”.
The REIT has also submitted a petition against Mike Ashley’s Frasers Group over an Evans Cycles store, which has remained open during lockdown.
For Jones, much of the issue stems from a lack of dialogue between landlords and the retailers in question.
“We are not being unreasonable, and we’d like to try and find a solution where we can, but some companies have been difficult to engage with,” said Jones.
“A lot of people talk about sharing the pain, but offer up very little when it comes to sharing the gain.”
In the past week a growing number of landlords have lodged winding-up petitions against a handful of occupiers in a bid to recover rents owed. These include LCP, which filed against Poundstretcher and Matalan, the latter of which has since settled.
LCP had submitted petitions against Poundstretcher through four special-purpose vehicles alongside fellow landlord Black Office, which has instructed Praxis Real Estate Management. Poundstretcher has not responded to requests for comment.
Privately owned Poundstretcher, which operates 450 stores, has continued to trade throughout the lockdown as an essential retailer. The discount chain had also showed signs that it had been struggling pre-lockdown.
Turnover grew by 12.1% £434.6m in the year ending March 2019, according to the retailer’s most recent accounts filed last month, but nonetheless it posted a pre-tax loss of £227,342.
Gary Roberts, managing director of Praxis, which is also starting proceedings against other retailers, said the landlord will take “robust and decisive action” where it faced “cynical opportunism”.
He pointed to a “sizeable minority of retailers” that are “cynically exploiting the moratorium on the enforcement of rent debt” by continuing to trade successfully, while refusing to pay rent or service charges.
“This is socially irresponsible behaviour of the worst kind that is both exploitative and highly destructive to other businesses in the supply chain,” Roberts told EG.
He added: “As a landlord we have every sympathy with those businesses that have been forced to close and we are endeavouring to work with them to put payment plans in place. But the situation is entirely different with essential retailers who continue to trade but refuse to pay their dues.”
Earlier this week, Secure Income REIT, which is managed by Nick Leslau’s Prestbury Investments, said it had “reluctantly initiated actions” against Travelodge after prolonged discussions with its senior team failed to progress.
The REIT pointed out that Travelodge has reported record earnings of £129.1m with net debt of around £311m, as well as the fact that its owners include Goldman Sachs, Avenue Capital and GoldenTree. The landlord owns 123 of the Travelodge chain’s 580 hotels, with the group’s overdue rent amounting to 6% of its annual rental income.
The tension between landlords and tenants may further escalate. On the occupier side, the hospitality sector has launched a campaign urging the government to support a nine-month rent-free period ending in the first quarter of 2021.
The proposal, led by entrepreneur Jonathan Downey, has been signed by bosses of chains including Burger King, Caravan, Dishoom, Gordon Ramsay Group, Gymbox, Hawksmoor, Nando’s, Pret, Subway and Wahaca.
This has so far gained backing from landlord Canary Wharf Group, but it remains unclear whether it has gone down as well with others.
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