12 March 2016 – by Amber Rolt

A majority of landlords are preparing to accept BHS’s proposed company voluntary arrangement.

The department store is aiming to cut the annual rent roll on its 164-store portfolio. It currently pays close to £91m a year on its stores and is looking to cut that figure by about 30% – a reduction of £27m.
Hammerson, Aviva, Standard Life, Land Securities and the Crown Estate are among those affected.

Many of the landlords contacted by Estates Gazette this week said the CVA was the best option, particularly for those with BHS anchors in secondary shopping centres, which would struggle to relet the space.

However, landlords that have a BHS in what would otherwise be prime lettable space in dominant shopping centres would rather be rid of it, though these are in a minority.
Discussions are ongoing, and with more than a week until the creditors’ meeting, the decision-making process remains active.

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Overall, BHS’s stores are only over-rented by around £15m, or 16.5%, but the business will not bring its payments up to market rent on those areas of its portfolio that are under-rented. About 15 of its stores are rented below current market value.

BHS’s portfolio has been split into three categories by KPMG: 77 stores that are unaffected; 47 that are considered viable but will have rent reductions; and 40 that can trade for 10 months paying only 20% of the rent.

The CVA proposals have caused a ripple effect in the investment market, with affected schemes being delayed or put on hold. Sales that may be affected include Redefine International’s £116m Grand Arcade Shopping Centre in Wigan.

For the CVA to go ahead, 75% of BHS’s creditors must vote in favour. The creditors’ meeting takes place on 23 March, with votes due the day before.

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