Jul 1, 2019
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Retail landlords take £2.7bn in writedowns as CVAs mount

Jul 1, 2019

Retail landlords are becoming more and more demanding over the terms of retailer company voluntary arrangements (CVAs) and it's easy to see why given news that major landlords have recorded write-downs of £2.7 billion on the value of their properties in the past year.

A spate of CVAs has hit large mall owners hard

The figures comes from Growthdeck Property's investment arm, which said that in the previous year, the figure was only £232 million, with the more-than-tenfold increase coming as a raft of big retail names have filed CVAs. 

Arcadia, New Look and Debenhams are among the most prominent retailers doing so and Monsoon Accessorize will also see its CVA being voted on this week. Rumours are also swirling around some other fashion retailers.

The value of property belonging to some of the biggest landlords in the UK has fallen in general due to the wider economic impact on retail of Brexit and the depressive effect that the online surge has had on store visits.

With retailers at risk of going under, the spate of CVAs has seen landlords forced to agree deals that mean radical rent reductions and even rent-free periods for their tenants. Another effect of this has been that retailers not resorting to CVAs have also been seeking to renegotiate their still-active leases or to get lower rents when leases come up for renewal.

The Growthdeck report said Intu took the biggest write-down hit with £1.3 billion last year while Meadowhall owner British Land wrote down £620 million. Bluewater landlord Landsec was hit to the tune of £422 million.

The ‘supermalls’ that these landlords own are widely thought to be more likely to survive the current retail devastation than many smaller shopping centres and high streets. But these large operators have suffered because the most newsworthy CVAs have been filed by big names that are more likely to have stores in supermalls.

But despite the giant hits that they've taken, these big property companies are generally well funded and don’t struggle to fill their space.

Those that are more likely to run into greater problems are smaller landlords that own individual properties in declining high-streets or are proprietors of some of the smaller malls. These are struggling to attract the best tenants in an environment in which the supermalls are a magnet for the key openings in their respective regions. 

One result of this has been that applications to convert retail space into other uses, such as residential, office or other leisure space, have been increasing.

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