In France, the shops are subject to a 6 pm curfew, and this has impacted Hammerson earnings as this dictates their tenant’s ability to pay the rents.
It has been reported Hammersons collected “just 41%” of the rent it was due to receive for the first quarter of 2021, though this is an improvement on what it received when the first lockdown was imposed.
Louisa Clarence-Smith in The Times said: Even before the COVID-19 crisis, Hammerson was under “sustained pressure”, with many retailers struggling to contend with “online competition, high business rates and rising wage costs”.
Since March commercial tenants have only paid 50% of the rent owed to landlords. With Hammerson shares down by 80% from the peak, the finance chief James Lenton, who only joined the company in September 2019, is set to quit. Analysts warn that the company is “still too highly geared”, with a 42% loan-to-value ratio even after a £552m survival rights issue in August.
Commercial landlords generally have been forced to agree “rent holidays”, deferrals and in some cases write of some rent arrears.
Mr Sajjad Ahmad, the British Landlords Association CEO, said: “The last few recessions where landlords have seen financial challenges, it has been the residential landlords who were hit the hardest”.
“Commercial landlords seem to be savvier than their residential counterparts. However, COVID-19 has battered commercial landlords. With lower demand for commercial property has the economy falters, rents will decline. With it follows the portfolio valuation of which inevitably will be lower.”
“Commercial tenants have seen market share been lost to online rivals who have leaner operating costs. COVID-19 has made lots of businesses do things differently, and some will keep running costs down by not renewing leases because they can work remotely. Commercial landlords should have financial support from the government, the health of our town centres, high streets and industrial estates is pivotal to the wider UK economy.”
“Some Commercial Landlords may be driven to Bankruptcy without Government help.” He said.
The demise of rival property firm Intu is a cautionary tale for Hammerson’s investors, says George Hammond. It was forced into administration last summer and then suffered the indignity of a “lack of willing buyers” for its portfolio of shopping centres. Even the Trafford Centre in Manchester considered “the jewel in Intu’s crown”, is now owned by one of its lenders after a sales process “failed to attract any viable bids”.
Commercial landlords like the Royal Festival Hall and Legal & General have adopted a different strategy to deal with rent arrears. They are taking unpaid rent from the Deposit money. This is a way around a government ban on legal action to recover the money from commercial tenants. Reports indicate this is now standard practice for commercial landlords.
Commercial landlords have a tricky balancing act to when it goes to dealing with rent arrears recovery. Property owners are mindful not to push the tenants to far and risk being left with an empty property.
Landlords themselves are under pressure to service their loans from their bankers too.
Author: Simon Hampton
Date: 26th of January 2021
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Disclaimer: It is not suggested directly or indirectly that any company named in this blog is close to bankruptcy. This blog is the opinion of the author and not in any way the opinion of the BLA.