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Property chiefs pledge support for occupiers on quarter day

The British Property Federation (BPF) has today presented occupiers with an unprecedented level of support from the UK’s biggest industrial, office and retail landlords, saying they will go the extra mile to support firms through the downturn.

The move is the first time any such pledge has been backed by so many major landlords, including pension funds and real estate investment trusts (Reits).

For many occupiers, yesterday was quarter payment day when rent for next three months was due. It is feared that many firms will today be counting the cost of recession and whether they can survive for the next three months. Given the snow, the VAT rise and poor trading, KPMG has once again predicted more business failures and further insolvencies at the end of March.

But property heavyweights, including British Land, Development Securities, Hammerson, Hermes, Land Securities, Legal & General, Lend Lease, Local Shopping Reit, Prupim and Segro have pledged support to occupiers and agreed to work closely with tenants and be open to discussing more flexible terms for sustainable businesses.

It comes a year after a pilot project was launched to cut service charges in shopping centres. Savings made through temporary initiatives, short-term deferral of maintenance projects and other operational costs, were passed on to tenants, while driving longer-term savings through improved process and by mutually identifying changes to service requirements also cut charges.

Although the BPF has criticised the likes of Blacks and Clintons for profiting from their cynical use of insolvency processes, it still believes that helping tenants is a win-win move for landlords.

One of the most high profile demands has been for monthly rents, but Hammerson - one of the UK’s biggest retail landlords – has said that only two firms had approached it for monthly payment terms this quarter day.

Liz Peace, chief executive of the BPF, said:

“It’s a sad fact that some businesses will not survive the recession, but helping businesses that do have a future get through a rough patch makes perfect sense. What this means is having open discussions about cost savings, offering monthly rents, or other temporary support and going that extra mile.

“Offering support for ailing retailers has meant the property industry has sometimes drawn criticism. In some CVAs landlords have taken a hit and found themselves caught between a rock and a hard place. Do they tear up leases because retailers have made bad business decisions and risk antagonizing their other tenants who view it as a subsidy or do they stand firm and then get blamed for the insolvent retailer going under? It’s a tough call.”

Richard Fleming, UK Head of Restructuring at KPMG, said:

"March rent quarter is often one of the most difficult crunch points for struggling retailers. The credit squeeze has served to magnify the situation with even healthy businesses struggling to keep a handle on working capital requirements. Latest figures from the Insolvency Service show a hefty 240% increase in CVAs in just two years. Businesses, like consumers, are trying to re-engineer their debt to sensible and more appropriate levels to ensure a steady and long term recovery and, of course, return to growth."

Charles Maudsley, executive director at British Land, said:

“Our retail portfolio is virtually fully let and characterised by strong customer relationships. We always work closely with our occupiers to understand their businesses and helping ensure their continued success is fundamental to this process.”

Julian Barwick, executive director, Development Securities Plc, said:

“Being in the right space, with the right level of service provision, is so important to a business whilst rent as a percentage of turnover is relatively small. The key thing for us is to provide good value for money which means providing space that's more productive than the competition's. But it’s also about maintaining a proper dialogue and this is a very much a two-way process that we are happy to undertake”

Duncan Grubb, head of credit control for Hammerson, said:

"We consider each retailer case on its individual merit, the most important part of this process is the early disclosure of hardship by a retailer and the provision of full accounts to establish their financial situation. We want to ensure that all retailers are treated fairly and while we work with those who demonstrate hardship and can provide a strong case highlighting how they can continue trading successfully we must also ensure that leases are honoured. This quarter we have only been approached by two retailers regarding support on quarter payment."

Rupert Clarke, BPF president and chief executive of Hermes, said:

“The property industry has been as badly hit by the downturn as retailers, and working with tenants to improve efficiency and cut costs to ensure that both sides of the business get through the dark days is essential. But one has to accept that retail market will be re-shaped over the coming years in response to changing attitudes and technology. The property industry too has come a long way in becoming an industry that is both responsible and responsive to changing demands. This openness has helped to mitigate the potential chaos that could have been caused by mass insolvencies and the kind of business failures many predicted two years ago.”

Richard Akers, managing director for retail at Land Securities, said:

“The industry's action on reducing service charges and land sec's introduction of a simplified retail lease coupled with a monthly rent option demonstrates how responsible landlords have been engaging to deliver much needed support.”

Tony Brown, chief executive of Lend Lease's investment and asset management business in the UK and Europe, said:

“The key thing to keeping tenants happy is understanding their business. We have a unique insight and that’s drawn through collecting all their sales data and building up their trust. This means that if a tenant is doing poorly, we can help and if they are performing well, we all benefit. Understanding their business allows us to help them and getting a feel for their turnover and the issues they have is critical. If you have a reputation for being a partner you get a much better response from existing tenants and new customers.

“In this market, partnership is very important. it’s mostly about understanding how the retailer makes money and about putting a lot of resource into building up the trust. Fundamentally, improving service is about the emotion of partnership, not simply about the mechanics of collecting rent or fixing the doors.”

Bill Hughes, managing director of property at Legal & General, said:

“They key thing for any institutional landlord is certainty, and we can help ourselves by ensuring our tenants are treated just as any other customer would expect to be treated. The Berlin Wall of landlord-tenant divide is long gone and we have to accept that the best way out of the downturn is to ensure that the longstanding relationships we have with our customers can continue for as long as possible.”

Nick Gregory, joint chief executive of Local Shopping REIT, said:

“As a major owner of local retail property across the UK, what sets us apart from some of the larger landlords is that our tenant base is largely made up of smaller retailers. Many of them are independents, who have also faced difficulties from the economic slowdown but who have, as a whole, taken a refreshingly entrepreneurial approach to survival, displaying their true passion for what they do and the local knowledge of how to do it well.

“This has also helped them to continue to perform relatively well throughout the downturn, particularly where their trade relies on non-discretionary spend and everyday items. We have, however, supported and encouraged many of our tenants in these difficult times. Working closely with them and assessing each case on its own individual basis, we have, where necessary, used flexible approaches to supporting retailers over the short term, so that they can go on to perform well over the medium to long term and allow us to make our properties more attractive to tenants and consumers alike by maintaining strong occupancy figures.”

Peter Best, head of UK asset management at real estate fund managers PRUPIM, said:

"We want to define our relationships through co-operation, flexibility and mutual respect - these negotiations are not a zero-sum game. This approach has helped prevent a difficult environment turning into a meltdown. The industry has shown flexibility on monthly rents, service charges and hardship support to retailers because it is the right thing to do, and because it is ultimately in the long term interests of our investors."

Ian Coull, chief executive of SEGRO, said:

“The priority for us is retaining existing customers and working to reduce vacancies by showing customers how focused we are on customer service. We are working hard to turn property from an industry of faceless rent-collectors into a sector that truly cares for its customers and one that is prepared to support them. In these difficult economic times it is essential that our customers and potential customers talk to us as soon as they identify an issue, as we recognise that small changes for us could secure their and our long term future.”

Notes to editors

Retail vacancy rates across the UK current stand at 12.5pc as March 2010 according to the Local Data Company.

Latest figures by the Local Data Company on retail openings and closures across the UK by sector can be found by clicking here.

According to the latest Insolvency Service statistics, released on 5th February 2010, there were 219 CVAs agreed in Q4 2009, compared with 91 for Q4 2007.

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 or 07968 12 45 45 or ateacher@bpf.org.uk. Various guests available for interview.