Last week Chief Executives at Burger King UK, Pret A Manger, Nandos and other leading restaurant chains jointly signed a letter to Chancellor Rishi Sunak calling for a #NationalTimeOut of rent for hospitality, leisure and retail tenants.
The letter requests that rent payments due from April 2020 be postponed until the start of 2021 and in return, nine months will be added to each corresponding lease - effectively creating a nationwide nine month rent free period for each tenant.
The hope is to take pressure off struggling businesses unable to generate an income during the lockdown and “new normal” period without the need for later Government handouts.
UK landlords are already struggling to obtain rent from their retail and restaurant tenants. During Q1 it was estimated that of the £2.5bn due in quarterly retail and restaurant rent only a third was paid.
The letter to the Chancellor requests Treasury support for landlords by providing them with the ability to defer loan/interest payments due on any property benefiting from the rental holiday for the same nine-month period.
Whilst this would be welcomed by some, the proposal is likely to be viewed as imperfect and not helpful for many pensions and investment landlord businesses with low or no debt. For example, REITs would become illiquid causing a suspension of trading/drawdowns until at least 2021 which would trigger reputational damage amongst investors. Additionally, how would lenders plug the gap left from suspended loan and interest repayments on their balance sheets? These concerns surely need to be addressed before the proposal can be treated seriously by landlords.
Hospitality business leaders have given their voices to a call for a nine-month rent-free period to help the sector survive the Coronavirus pandemic.