United We Stand

Expert Advice: Ted Schama on overcoming property challenges

By Ted Schama

- Last updated on GMT

Ted Schama on overcoming restaurant property challenges caused by Coronavirus

Related tags: Coronavirus, UnitedWeStand, Casual dining, Property

The property industry veteran on how to deal with landlords and what the Coronavirus means for the restaurant property market.

What advice would you give operators who can’t pay their rent – what should they be asking for?

Communication is number one, closely followed by transparency. There is no doubt that if the restaurant is closed and not earning income then paying a rent is absurd. I would ask for a three-month holiday. We need to break this period into manageable chunks. It would be presumptuous - certainly in property terms - to try and manage it in more than one quarter at a time. Should that not be possible, you need to work with them to identify further options. These include blending payments into the remainder of the rental term or perhaps paying half rent to share the pain.

How receptive are landlords being to these sorts of requests? What can operators do to make them more receptive?

Most of the landlords that are able to handle this sort of request are extremely receptive. It's worth bearing in mind that most of the bigger landlords have a wide spectrum of income of which restaurants and retail will only form a portion. But when it comes to people that are using that rent to play a mortgage on that property the situation is a lot more tricky. For the independent and smaller landlords, this is a very different challenge as they would have their own repayment schemes based on income from their tenants (the restaurants) and would be in default if they are unable to pay their repayments. In all cases, politeness when dealing with landlords will go a long way.

What if you really can’t pay?

It's very important to make it clear to the landlord that you do intend to pay it back as soon as you can. That's an important statement. If you do end up in court you might have to prove there was a positive intention and a plan to pay. Another thing to bear in mind in all this is that even if the landlord was able to successfully remove you, who is going to sign up to a new lease today? I would suggest very few albeit we are still engaging with operators taking a long-sighted view beyond the turmoil.

What Government aid is there for people struggling to pay rent? Should restaurants be using the Government loans for this purpose?

Only as a last resort. Most operators I know are hoping they won't need to go down that route. That does raise another issue. There are brands that are on the brink irrespective of this crisis. Once restaurants start to re-open for business landlords will start weighing up their options. If you are already highly leveraged, then the property risk will come in when we normalise again.

What do you think will be medium term effect of the Coronavirus pandemic on the UK property market?

There will be a rout of weaker tenants. Sadly, some of the businesses that survived the CVA process over the past few years are vulnerable. If you were already exposed and highly leveraged ahead of the crisis it's going to be tough. This will ultimately lead to a raft of vacancies of properties. The positive is that we'll see a continuation of a drop in premiums and rents, leading to more good opportunities for fitted sites for emerging operators. Medium term effect in my view will be fairly positive. In previous conventional recessions, restaurants are the last to suffer and the first to rebound. This time, as long as people are sustained economically with the relief of mortgages and job security, then I would imagine that we can’t wait to get back in the restaurants, pubs and bars where we all belong. 

#UnitedWeStand has been created by William Reed hospitality titles BigHospitality, Restaurant magazine and Morning Advertiser and is supported by Arla Pro, McCain and Unilever Food Solutions.

 

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