House of Fraser’s upcoming strategy to close swathes of stores and renegotiate rents on other shops has come under criticism from landlords who will bear the brunt of the rent cuts.
The British Property Federation (BPF) and Revo – which represents both landlords and retailers – said members were increasingly unlikely to approve company voluntary arrangements (CVAs).
House of Fraser is set to launch its CVA next month and is likely to include plans to close around half of its 59 store portfolio, as well as seeking rent reductions on those remaining open.
However, questions are now being raised around the department store’s motives to undertake a CVA.
BPD director Ian Fletcher told the Telegraph that its members were becoming less likely to absorb the losses associated with CVA deals, especially in a market where it was becoming harder to re-let space.
Also speaking to The Telegraph, Revo president Mark Williams said “CVAs have become an acceptable method for companies to get out of leases and that’s unfair”.
Against a backdrop of increasing numbers of retailer insolvencies, high street landlords are now accusing them of forcing them into agreeing to rent cuts via CVAs.
House of Fraser joins Mothercare, New Look and Carpetright, who have all entered into CVAs this year.
If House of Fraser’s CVA does go ahead, it is likely to come under strict scrutiny from its landlords, including Legal & General and Westfield.
They are reportedly considering plans to make demands in return for their vote of approval of the CVA, such as detailed financial forecasts, an equity stake in the 169-year old department store chain, or a cut of its future profits.
Property companies can still block the CVA and demand improved terms if more than a quarter of landlords rebel against the company’s proposed terms.
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