Westfield threatens chains including Pret for rent arrears

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Pret A Manger, Hugo Boss and the UK’s largest independent toy retailer have been threatened with legal action by the owner of the Westfield shopping center over unpaid rent as England enters a second foreclosure.

“This is unprecedented, not a reasonable action for an owner at a time of year like this, especially on the first day of foreclosure,” said Gary Grant, executive chairman of The Entertainer, a toy chain with 173 stores.

Mr Grant received a letter from Westfield on Thursday asking the company to pay its bill in full or face legal action to collect the unpaid rent.

The letter, viewed by the Financial Times, threatened to take enforcement action if payment was not received within a week. Mr Grant said the threat was withdrawn after contacting his local MP about the dispute.

Sandwich chain Pret, which has announced more than 3,000 job cuts since the pandemic began in an attempt to cut costs, and fashion retailer Hugo Boss have also been asked to pay their rent arrears or make facing Westfield enforcement action, according to people with knowledge of the matter.

Pret and Hugo Boss could not be reached for comment.

The episode highlights the tension that has built up between tenants and landlords during the pandemic and threatens to escalate ahead of the all-important Christmas shopping season.

Mr. Grant makes 50% of his annual income in the 12 weeks leading up to Christmas Eve, half of that income in a last four week flash.

Melanie Leech, managing director of the British Property Federation, which represents landowners, said that “the moment [of the lockdown] couldn’t be worse. . . many businesses generally depend on profits made at this time of year to sustain them for much of the rest of the year ”.

Rent arrears that have accumulated since March have become “an insurmountable challenge” for many businesses, added Ms. Leech.

Figures from the UKHospitality trade body show that by the end of the year the industry will owe nearly £ 3bn in unpaid rent, and business owners are losing £ 1.5bn every three months in lost rent, according to an analysis by Remit Consulting.

Westfield is part of the Unibail-Rodamco-Westfield group, which has a 60 billion euro real estate portfolio comprising the centers where Mr. Grant is a tenant and seeks to raise 3.5 billion euro from investors and sell shopping centers worth 4 billion euros to reduce debt.

Scott Parsons, URW Regional Managing Director, said: “Our corporate strategy is to work in partnership with our retailers. It is only in situations where a retailer has refused to collaborate in finding a deal that could work for both parties that we would consider legal action. ”

Tenants and landlords encouraged cooperation, but some reported resistance. Mark Derry, executive chairman of Brasserie Blanc, which owns pubs and restaurants around London and the south-east, said the company has made revised agreements with two-thirds of its owners under which it would pay around $ 7 % of turnover in the form of rent. The remaining owners had “refused to make a commitment,” he said.

“I think they think the problem is so desperate that it’s not worth negotiating,” he said.

But James Daunt, chief executive of Waterstones, said it was up to the government to put in place formal mechanisms to deal with the arrears rather than relying on a voluntary code of conduct and a moratorium on evictions.

Retail, hospitality and property organizations call on government to introduce ‘property rebound subsidy’, which would cover up to 50 percent of rent and sit alongside employment leave program .

“The landlord / tenant issue has just been put aside,” said Daunt. “If you look at France, Italy, the Netherlands or Germany, they all have programs or advice in place on how the consequences [of arrears] should fall between the parties.

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