Friday, 1 June 2018

Pity the poor landlords.

Emailed in by SG, from The Guardian:

High street landlords are gearing up for war with retailers, whom they accuse of railroading them into agreeing to rent cuts via increasingly controversial company voluntary arrangements (CVAs).

Struggling businesses including the department store chain House of Fraser, the children’s retailer Mothercare and the Carluccio’s Italian restaurant chain are all seeking CVAs, where property owners accept lower rents to help a tenant avoid financial collapse.


Good, as the alternative is the parasite killing the host. Nice to see that retailers have woken up to the fact that they pay a lot more in rent than they do in Business Rates; there's no point whining about the latter if you can do something about the former.

But we've covered that point before, here's the classic bit of Home-Owner-Ist one-sided economics:

Begbies Traynor partner Mark Fry said: “Landlords represent pension funds, investment funds – they’re spending the ordinary man in the street’s money. So when rents aren’t paid, that affects the performance of these funds. It’s not just about rich property owners.”

That cuts both ways.,,

Begbies Traynor partner Mark Fry said: “Shares in retailers are owned by pension funds, investment funds – landlords are taking the the ordinary man in the street’s money. So when high rents are enforced, that affects the performance of these funds. It’s not just about rich business owners.”

Fact is, if pension funds own the right mix of retailers and land-and-buildings, they couldn't really care less how this pans out. In fact, it is better to err on the safe side, which is lower rents and higher returns from their retail investments, than it is to wipe out the value of their retail investments by trying to enforce high rents, and then ending up just owning a load of empty buildings.

8 comments:

Lola said...

And, if rents are cut, business rates should fall also as they are expressed as a %age of the rental value. Not that that's a good idea. Better to increase BR and force further cuts in rents?

Ben Jamin' said...

Isn't this all a bit cack-handed? Problems in the market being able to quickly adjust are caused because it's the tenant that pays. So why not just send the landlord the bill directly?

It would be interesting to know the logic as to why they set up UBR as they did in the first place.

Derek said...

Human shields, BJ. This way increases in Business Rates cause as much whining as possible because the innocent bystanders (aka tenants) are guaranteed to get hit when you tax the landlords.

Mike W said...

Good find Mark. Shame you have to put both sides to the argument. Surely that was the 'business journalist' sole function in the first place?

Anyway, CVAs = add on LVT Lite for business. Great.

Mark Wadsworth said...

L, true, but you see some mad stuff. Client sent me his BR bill for checking recently, it was out by a factor of four.

BJ, correct, for administrative simplicity if nothing else. And making legal incidence match economic incidendcence.

D, human shields, exactly.

MW, I'm a bookkeeper and my sun sign is Libra, I always look at both sides. Would seem fucking stupid to do otherwise.

If this whole CVA scam means more shop on the high street, then great. I vastly prefer bricks to clicks.

formertory said...

Fact is, if pension funds own the right mix of retailers and land-and-buildings, they couldn't really care less how this pans out.

Fact is, if pension funds own the right mix of retailers and land-and-buildings and equity and fixed-interest vehicles, they couldn't really care less how this pans out.

There. I have the colossal effrontery to have fixed that for you :-) . Having a decently diversified list of holdings tends to work reasonably well.

Mark Wadsworth said...

FT, indeed and thanks!

Bayard said...

"It would be interesting to know the logic as to why they set up UBR as they did in the first place."

Never ascribe to malice that which can adequately explained by stupidity. My vote would go for the landlording class being economically illiterate enough not to realise that they are actually paying the BR in reduced rents and thinking, correctly, that the best tax is one that someone else pays.