British Land battles stores over rent bills

BRITISH Land is locked in a battle with major store chains who are refusing to pay more than £10m in rent as the coronavirus crisis hammers business.

As the landlord reported a £1.1bn annual loss, it revealed it was only able to collect 43pc of the retail rents owed to it in March.

Bosses offered help to smaller businesses that are struggling, with some granted temporary payment holidays and others given more time to pay.

But 12pc of the rent owed – or about £10.5m – remains outstanding from what British Land described as ‘strong retailers’ rather than those fighting to survive.

Other big firms, including Boots, have sought to renegotiate deals, while chains that have reportedly refused to pay landlords during the virus crisis include Sir Philip Green’s Topshop, New Look and JD Sports.

By comparison, British Land said that 97pc of office tenants had paid up in full.

Reporting its annual results, British Land said the value of its property portfolio has fallen £1.2bn, including a 26pc drop in its retail arm.

The figure for the year to the end of March took into account the early impact of the pandemic, which forced shops to close their doors and has pushed many to the brink of bankruptcy.

Overall, the drop caused British Land’s annual losses to widen from £319m to £1.1bn, after revenues fell from £904m to £613m.

The company warned that the crisis represented ‘a new and major risk to the business’ and that the dividend, which was suspended earlier this year, was unlikely to return until rent payments improved.

The gloomy update came after rival Land Securities also saw its portfolio plunge by £1.2bn in value over the same period.

Chris Grigg, British Land’s boss, said: ‘This was already a difficult year for retailers, many of whom have been severely impacted by the lockdown, and the early effects of the crisis were reflected in the value of our retail portfolio.’

Just 15pc of the company’s retail properties were being used as of Monday.

Most of them were supermarkets or pharmacies considered ‘essential’ under lockdown rules that have battered the finances of many other physical shops, and left some unable to afford their rents.

Taking into account the virus, British Land said its retail portfolio had fallen by £1.4bn in value to £3.9bn during the year.

And Grigg said that the company expected the pandemic to accelerate ‘major trends’, such as the shift towards online shopping and retailers operating out of smaller shops. Companies are also expected to allow more staff to work from home after the pandemic, with some bosses saying they intended to slash the amount of office space they used.

But British Land predicted demand for ‘high quality, modern and safe environments, which provide more space per person’, saying employers were likely to reduce hot-desking and use less crowded layouts.

Russ Mould, investment director at AJ Bell, said that the ‘largely unspoken fear’ was that trouble in retail could spread to offices as well.

‘For now the value of British Land’s offices are holding up and most of its tenants are paying rent on time,’ he said.

‘However, this may change as recession begins to have a more widespread impact. In the longer term demand for offices may be affected as working from home habits built up over the pandemic prove hard to break.’

British Land’s shares rose by 7.4pc, or 28p, to 408p.