Amid Eviction Moratorium, Wiggle Room Tightens for Retail Landlords & Tenants in the UK

Amid Eviction Moratorium, Wiggle Room Tightens for Retail Landlords & Tenants in the UK

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Land Securities, a Giant UK REIT, announced that it would try to sell a large portion of its properties. No buyers identified yet.

By Nick Corbishley, for WOLF STREET:

Land Securities (Landsec), one of the UK’s largest REITs, has unveiled plans to sell of up to a third of its £12.8 billion portfolio in a huge shift away from the retail market. It has not yet identified buyers. Besides its retail properties, LandSec owns a vast portfolio of London offices and specialist assets consisting of hotel, leisure and other properties. Those specialist assets, together with its retail properties, represent around half of the portfolio’s total valuation. But some of them are now on the chopping block.

Landsec says it will sell some properties to “crystallise significant value already created” and invest in new projects in London, including offices, whose occupancy levels have also been hit hard by the virus crisis. London, it says, remains “one of the world’s gateway cities” and central London assets, which already represent 64% of its portfolio, are “a good source of liquidity over time, with clear potential to recycle capital out of some assets and reinvest into new growth opportunities.”

At the end of September, when rents for the final quarter of 2020 came due, retail tenants paid only 13% of rent due for the fourth quarter, worse than at the shortfall on rent-due date at the end of June, according to the UK’s National Law Review. This added £2 billion to the pile of unpaid rents.

Foot traffic remains down almost a third compared to a year ago, with large cities hit hardiest. And it keeps on falling, as the government’s hospitality curfew, work-from-home policies and online shopping batter the high street. Many shops have already hit the wall. In the first nine months of this year, 13,900 high street stores were forced to shutter indefinitely, up one quarter from the same period in 2019, which itself was a record year, reports the Centre For Retail Research.

In the hospitality sector, 82% of businesses say they need a reduction in rent to survive the winter months, particularly after the UK Government imposed its 10 p.m. curfew for bars and restaurants.

Many tenants aren’t paying their rents, either because they can’t or are choosing not to. At the end of September, the government, much to the dismay of commercial property owners, extended its ban on evictions of commercial property tenants to December 31. The moratorium is not a rent holiday and tenants remain liable for unpaid rent. But many retailers have used the hiatus to preserve cash and/or try to renegotiate the terms of their rental lease.

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Wolf Richter

In his cynical, tongue-in-cheek manner, he muses on WOLF STREET about economic, business, and financial issues, Wall Street shenanigans, complex entanglements, and other things, debacles, and opportunities that catch his eye in the US, Europe, Japan, and occasionally China. WOLF STREET is the successor to his first platform… TP-Title-7-small-200px …whose ghastly name he finally abandoned in July 2014. Here’s the story on that. Wolf lives in San Francisco. He has over twenty years of C-level operations experience, including turnarounds and a VC-funded startup. He earned his BA and MBA in Texas and his MA in Oklahoma, worked in both states for years, including a decade as General Manager and COO of a large Ford dealership and its subsidiaries. But one day, he quit and went to France for seven weeks to open himself up to new possibilities, which degenerated into a life-altering three-year journey across 100 countries on all continents, much of it overland. And it almost swallowed him up.