There’s nothing voluntary about CVAs for landlords

The list of retailers apologetically seeking CVAs grows longer by the day. Indeed, the trickle has turned into such a flood that the CVA seems to have turned into the retailer’s default get-out-of-jail-free card. But someone has to pay, and industry heavyweights such as British Land’s Chris Grigg are now railing against the fact that that someone appears to be the landlord.

It is not hard to see why there is growing alarm over the use of CVAs or why calls are mounting for greater regulation. We appear to be moving further and further away from the mechanism’s original purpose to help troubled operators that have otherwise sustainable business models stave off administration by renegotiating their liabilities.

Some retailers seem to be in rather too good health to be undertaking CVAs, others seem to be looking not so much to mitigate tough trading conditions as to right-size their organisations having over-expanded when times were good.

Then there’s the really cynical stuff: the pre-emptive plays to hedge against retail trading conditions getting even worse. No wonder the way CVAs are being used by some retailers is being seen as highly unethical and, in some cases, borderline illegal.

Regulation surely has to be the way forward. It goes without saying that the landlord-tenant relationship should not just be a one-way street where the landlord says ‘jump’ rent-wise and the retailer says ‘how high?’ But the answer is not simply to reverse the flow of traffic and force landlords to offer retailers significantly reduced rents or else.

There is also the knock-on effect to consider. Next is already asking to insert ‘CVA clauses’ into its leases, so if a neighbouring retailer gets a rent reduction through a CVA, it does too. Others will no doubt follow suit and more retailers will no doubt seek CVAs – increasingly unapologetically as they become the norm.

I know retail is a dog-eat-dog world, but this is getting silly. It is not sustainable to allow so many retailers to undertake CVAs. It just shifts the problem from retailer to landlord and the balance of power from landlord to retailer. The likes of the BPF and Revo need to knock a few heads together and come up with an equitable solution.

Doing the double

Last week, Property Week hosted not one but two fantastic industry events. First up was the RESI Awards at Grosvenor House on London’s Park Lane, where we celebrated residential superstars such as personality of the year Helen Gordon of Grainger at what I am delighted to say was our most diverse RESI Awards yet – and also the toughest to judge.

Then it was a taxi ride for yours truly across London to welcome almost 400 delegates to the inaugural two-day Industrial & Logistics Conference and Awards at Hilton London Syon Park.

The question on everyone’s lips was: ‘Is the sector overheating?’ and good news, the consensus was that it is not… yet. The award winners demonstrated just why it is such a strong market at the moment. Let’s hope it remains so and that the event is the first of many more to come.