Landlords and the wider property industry have revealed that the approval of BHS’s CVA did not come as a surprise.
They have also warned that in order for the CVA to work, it needs to be implemented alongside a thorough business restructuring, for which BHS still needs £100m.
Alan Lockhart, property director, NewRiver Retail, said: “We voted in favour of the CVA, so we are pleased that others have also done so. We are hoping that it will provide BHS with breathing space to restructure its business in order for it to have a fighting chance for it to survive.”
“We have the flexibility to take the vacant space back, and the CVA has not come as a shock to us, or indeed the wider market space. We have been working on contingency plans for some time now, and already have some options that we are ready to pursue.”
Damian Sumner, head of retail agency at JLL, said: “This vote will avert the threat of immediate administration that hangs over the chain, but will not ease the long term issues that BHS faces. To survive on the high street BHS can’t be kept on life support: Retail Acquisitions now need to be able to present a clear and viable plan as to how a large scale property restructure will allow a turnaround in fortunes.”
Melanie Leech, chief executive of the British Property Federation, said: “Each CVA has to be taken on its merits, and landlords will have thought carefully about how to respond to this, and whether the proposals make a credible case for rescuing the business, or just keeping it afloat for the next couple of years.
“Whilst the CVA will help alleviate some of the short term pressures on the company it is imperative that the owners of the company now raise capital to reinvigorate it.”
The CVA, which takes effect from 29 March, will see 77 shops undergo no rent change, 47 shops pay a reduced rent of 75% or 50%, and 40 stores that will just pay 20% rent.
Landlords that have leases in the latter category will be able to terminate them if they find other tenants, but many that have large BHS shops in secondary shopping centres may struggle to re-fill the space.
Mark Robinson of Ellandi said: “The all-too-frequent use of CVAs by retailers to specifically undermine lease commitments makes the repealing if the 1954 [Landlord and Tenant] Act more pressing.
“Tenants can now rescind leasehold commitments through CVAs whereas landlords are committed to their side of the original agreement and then compelled into automatic renewal rights for the tenants.”
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