Helping operators navigate the crisis
by Anthony Lorenz
After five decades advising hospitality Tenants negotiating rent reviews, lease renewals, acquisitions, and disposals, and also, deferments and rent free periods, in recessions – 74, 84, 94, and of course, Lehman’s 2008, I thought I had seen it all.
Clearly, I was wrong.
The next few months for the UK’s hospitality industry, including the June quarter day rent demands, will be a critical period for most, particularly with suggestions that the sector will be able to reopen in July.
The Government may continue their support by extending the moratorium where Landlords cannot evict Tenants or otherwise pressurise them to pay the March to June rent until September quarter day, or even longer.
However it is going to take time for businesses to recover.
A recent Hospitality Leaders Poll found that the overwhelming majority think it will take between one and two years to return to profit.
To help survive this period, here are five pieces of advice for operators.
Cash is king
It goes without saying that cash is king so it follows that tough talks are required with Landlords not just to defer rent – kicking the can down the road – but to seek rent free periods and lease restructuring deals affording the maximum chance of survival.
Remove the emotion
Emotion, despite fear, is not beneficial.
Put simply, it muddies the water, distancing the Landlord and Tenant respectively.
Landlords have advisors or are skilled in maintaining their stance, and operators will best benefit by choosing their gladiators who invariably extract better deals.
Remember Landlords are bluffing
Although they may not admit it, most Landlords will want to hold onto their Tenants for when the curtains reopen, and without that support, there will be liquidations in abundance.
Landlords will really feel pain when they try to re-let empty properties in an oversupplied market.
Sensible Landlords are willing to negotiate.
Campaigns underway to support the industry include ‘National Time Out’, seeking a nine month pause on rent payment, and, ‘UK’s Grand Outdoor Summer Café’, calling for streets to become al fresco dining spaces.
The more signatures and engagement they amass, the better the chance of operators gaining rent free periods, as well as outside trading where possible.
Engage your local MP
The Government want to support the industry and have five new task forces dedicated to restoring vulnerable sectors of the economy, hospitality included, but their reopening statement from July sends a dangerous signal to Landlords that they can start expecting rent again.
An extension of the moratorium from March to June stopping aggressive rent collection, until September at least, is necessary to provide valuable time to enable negotiations in hand to continue.
Lobbying your local MP for an extension may help achieve this – time is of the essence.
We are heading for a new, and unpredictable world, and worry for the industry where, if Landlords don’t help their Tenants, we predict liquidations of a third of the units around Leicester Square alone.
It is critical that Landlords and Tenants find solutions that help operators through the crisis, and, if not, perhaps even the Government will step in forcing landlords to do so.
Whilst I am optimistic, there is a long way yet to go.
Anthony Lorenz is the Founder of Lorenz Consultancy, a leading boutique commercial property consultancy, advising many of London’s leading clubs, bars, restaurants, and casinos, and other hospitality businesses.