Blacks Leisure have avoided administration and destruction by getting landlords and creditors to agree to a company voluntary agreement. Landlords are having a bit of a moan at having to take all the pain but they have little option. Long lease agreements with upwards only rent increase and unfair rent reviews have punished retailers for a long time. A unit may have had a brand new retail park open at the other end of town and still find itself locked into a 12 year lease with increasing rents as its footfall continually drops making it not just unprofitable but completely cancelling the profit from another store or two.
Now, with empty space on every high street in the land the hiking boot is on the other foot.
Liz Peace, chief executive of the British Property Federation, said: "While this CVA has covered landlords' empty rates payments, it has not taken any bite out of shareholders' or other creditors' pockets. Landlords have borne all the pain, and when you consider that many of our pension funds are invested with them, it is clear this is not fair."
Oh dear. Boo Hoo.
Landlords have to pay the rates even on empty buildings and with virtually no chance of an early let for the newly empty Blacks and Millets units the administrators X in the £ wouldn't have gone far.
In fact landlords still have a pretty good deal. For one, they are not among the 450 staff who will be unemployed shortly as Blacks Leisure close their 89 worst performing stores, about a 1/4 of the group. Secondly they will get a 6 month rental payment. Thirdly they will continue to have the rates paid on the empty units, which are usually a third of the total rent bill, by Blacks instead of having to pay them themselves.. Fourthly, by being forced to agree to monthly, instead of three monthly in advance rents, they have greatly increased the chances of the firm surviving to honour its future rental payments.
Lastly, although there is no detail, it would be amazing if the new lease agreements do not contain entirely favourable conditions for the landlord, such as a one way, one month notice to quit, or rent review in 2010 or something similar.
Blacks has been on the C&W sick list a long time. KPMG who brokered this CVA also did so for JJB, another on the very sick list. They are not in the clear, just temporarily out of intensive care, but the new improved medical facilities might just help them survive.
Its not guaranteed though. BQ can think of at least two high street chains that currently pay zero rents and are still losing money every day.