The British Property Federation (BPF) has rejected a claim by accountancy giant Deloitte that it endorses a Credit Voluntary Agreement (CVA) which troubled high street retailer New Look hopes will help turn around its flagging fortunes.
The chief executive of the BPF, Melanie Leech, issued a swift rebuttal on Wednesday after an advisor from Deloitte – which is overseeing the insolvency process – said the proposed CVA reflects the federation’s views on what constitutes a fair agreement.
Under the terms of the CVA, 402 New Look stores would switch to a revenue-based rental model. The remaining 68 shops in the retailer’s portfolio would stop paying rent altogether. The proposal is a bid to slash costs in the wake of the Covid-19 pandemic, which has hit sales hard.
Daniel Butters, advisor at Deloitte, said: 'The turnover rent model better aligns the risk and reward of trading during these uncertain times and the CVA, together with the wider-balance sheet restructuring, provides a stable platform upon which management’s strategy can be delivered.
'We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of New Look.
But rejecting as ‘untrue’ the claim that the CVA reflects the federation’s views, Leech went on to brand the proposal as ‘unfair’ on landlords.
'CVAs should not be about permanently ripping up leases – they are supposed to be a temporary measure, as part of a wider rescue plan, to get a business back onto its feet,’ said Leech.
'Property owners absorb significant losses during a CVA to support a business’ future, and in return expect the support measures within a CVA to come to an end upon termination of the CVA.
'New Look is using this CVA to permanently re-write its leases, this proposal is not about a time-limited rescue plan. Property owners are increasingly supporting turnover-based rent models underpinned by collaboration and transparency, but CVAs should not become a mechanism to enforce this.
'We understand the challenges facing the retail, hospitality and leisure businesses on our high streets, which are at the sharp end of the Covid-19 pandemic. CVAs, however, must not unfairly compromise property owners, who need to consider the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property.'
