Torridon Secures Manchester Site for Sixes

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Torridon are delighted to have worked with the Sixes Cricket Club team in securing their site at the Manchester Corn Exchange.

What an addition this will be to Manchester.

MCR will be their third site following hot on the heels of Fitzrovia and Fulham with a target date of the summer.

Torridon are retained on their expansion and there will be no rain delays with this brand, if you want to know more, please get in touch!

Thanks to Suzanne Wainwright at Metis Real Estate Advisors and Andy Coles at Aviva for helping this to run smoothly from start to finish.

Torridon secures Sixes Flagship in W1

Torridon is delighted to have secured their flagship site on Great Portland Street.

What an addition this will be to the West End.

GPS will be their second site after Fulham with a target date of the June.

Torridon are retained on their expansion, if you want to know more, please get in touch.

Their landlord pack can be accessed by clicking here.

La Nonna Secures First Bricks and Mortar site

Out of Small acorns grow big oak trees.

Torridon is delighted to have worked with Eduardo and Dani in acquiring their first bricks and mortar site at Brixton market.

Having earnt their stripes at Boxpark, Flat Iron Square and Princes, these guys are ones to watch.

We will be looking for site 2 soon, watch this space.

“Lies, Damned Lies and Statistics”

A Retail and Leisure Agent’s view on what lies ahead for the retail property sector in 2021

 

Last December I had a client lunch in Canary Wharf with an operator whose day-to-day job is in global finance. He advised me to move money out of shares and get cash in the bank, as things were going to get rough.

He was also bulk ordering food and supplies. He had seen what was happening with the coronavirus outbreak in China and said to be prepared for it to hit us like a ton of bricks in January. It hit in March, and how I wished I had listened more intently.

What lies ahead in 2021 will be solely down to the impact of the coronavirus vaccine and the speed it is rolled out.

It will be one of the greatest things that has happened in modern medicine and will be a game-changer.

When the world reopens, there will be a lot of people wanting to have fun again.

This is potentially incendiary, given the mire we are in now with a third lockdown compounded by likely job losses throughout the year – however there are reasons to be optimistic.

It is always darkest before dawn.

There are reasons to be cheerful, even as we contemplate the pretty miserable winter months ahead (with or without the Six Nations to go too).

We have already commenced the first vaccinations, with many Britons already injected with the Pfizer-BioNTech vaccine. The Oxford-AstraZeneca vaccine has been approved and is ready to roll out. The Moderna vaccine is also on the way and should be approved in Europe soon.

The government needs to look at how to control the controllables when it can – one of the best things it did at the start of the pandemic was partnering with the private sector to develop the Oxford vaccine, which is a fraction of the price of the others.

We are still way off the two million jabs a week that scientists have warned we need to reach. The government should look to the private sector for help with logistics as it did with developing the Oxford vaccine.

Tesco, Amazon et al have a great deal of experience in distributing goods in refrigerated lorries.

There are also lots of closed-down hospitality venues with a large amount of refrigeration that is going unused. These venues could be used as vaccination hubs, with pub chain Brewdog already throwing their hat in the ring.

Hopefully if we can reach the target of two million vaccinations a week, businesses can start to reopen and the economy will continue to roll on. Various sources have said this could be achieved by March or April – we should strive for three million jabs a week if we want this to happen sooner.

Regardless of when the milestone is hit, I believe we are going to be in an expansive market when this is achieved. Those that have fought tooth and nail with government lockdowns will come out the other side bruised and bloodied, but ready to go again. If you can survive a pandemic, your business is strongly robust.

As confidence and easing of restrictions return, I am firmly of the belief 2021 will be a great year for British business and the British consumer.

Households and corporate funds are well stockpiled, with household savings soaring during the previous lockdowns to £113bn.

That money will need to be spent and with travel restrictions in place for at least part of 2021, much of those savings will be spent in the UK.

This effect on the economy is going to see operators in 2021 looking to get out the starting blocks to secure site openings from the tail end of Q2 onwards.

The one uncertainty we had up until now was Brexit. Either way it is binary now – we have a deal, albeit EU share trading financial markets are still to be resolved. That being said, it would appear the UK really wants to try and encourage listing in the London Stock Exchange. A return to the Roaring Twenties?

The retail and leisure investment market has endured years of uncertainty from Brexit, with that uncertainty now exacerbated by Covid-19. No matter what side of the fence you sit on – be it buyer or seller or remain or leave – what the market needs is certainty. It needs rules.

With rules, the investment market will have some clarity, it should start to behave properly and transactions within the retail and leisure sector should start to begin again.

Will the opportunity for rental growth still demand a premium or will sensible, well-rented and diversified assets be top of the list? Will those that are selling out now look to return again further down the line?

With coronavirus not just ripping up the rule book but setting fire to it, retail and leisure leasing deals will not look the same as they used to.

This is another layer of uncertainty, and it will be interesting to see how people look to price these in, vs traditional leasing deals based on covenant.

In theory, if landlords are sharing on the up and downside of deals, you would like to think it should make the market more stable, with pricing based more on the macroeconomics of competition in the locality and how that can affect turnover and potential rental at a particular site.

More due diligence will be needed to understand operators’ businesses.

I see a far more transparent playing field, and that’s a good thing.

Traditional leasing deals will appear in certain sectors, namely supermarkets. They will be in greater demand and will attract a premium, at least in the short-term.

However, those first adopters in the investment market that move with the times and embrace the sharing of an upside, will enjoy the fruits of their pioneering spirit when the rest catch up in years to come.

Some property businesses are oil tankers. They take a while to turn, but when they do, they will be full steam ahead and going back into retail and leisure when there is a bit more clarity and rules have been updated.

Retail investment is by no means dead, there will be some who will look very clever in a few years. There is a lot to be said for being the one that puts your head above the parapet and takes the plunge.

Leasing retail and F&B property is changing, with independents and growing businesses becoming more desirable for landlords. There has definitely been a softening of landlords’ views as they embrace change. They have had it tough; the government needs to give some clarity on what is going to be done with the lease forfeiture moratorium.

It is the one uncertainty and as it gets kicked further down the road to March it will only exacerbate a problem by going further.

We need a line; we need to know clarity.

Clarity will bring both parties to the table – tenant and landlord. Everyone has taken a hit, and everyone needs to compromise.

We know the operators who have been storing cash rather than paying rent.

We also know they have traded well.

Every dog has his day – however those dogs may have their day in court if they are not careful.

It’s a marathon not a sprint, particularly with restaurant and leisure leases which are generally 15 or more years. A strong landlord and tenant relationship is key and you are better to be the operator that can compromise. If you want to open more stores/restaurants etc, it’s better to be the good guy. People have long memories.

I commend the supermarkets for returning their rates. However much I disagree with rates, it was the right thing to do given they have been one of the few businesses open throughout the pandemic.

There are landlords that are realistic and are aware of current market conditions. Base and turnover is becoming normal and is fair and is common in mainline Europe and the USA. The sharing on the upside is better and I do believe in time this will be looked at with the RICS as to how this can translate across to property valuations.

Valuations based on the covenant of the tenant is an interesting area to look at. What were great businesses in January 2020 are now looked at differently.

Cineworld is a case in point with the ‘will they, won’t they’ CVA. Add to that all the tenants who have a good covenant and are still profitable, but won’t pay rent.

I suspect there is going to be some uncertainty over certain operators as things start to reopen, however I do believe by this time next year the world will have rotated again, there will be clarity over Brexit and coronavirus will be in the rear-view mirror. One way or another, we will have established those with staying power.

What is clear is that landlords will no longer always rush to the big multinational topco on the lease, because what was once seen as the be all and end all is perhaps not the safest option after all. What 2020 taught us is you can still have your fingers burnt.

What was seen as an embarrassing thing to do (doing a CVA), is now par for the course. I am watching what happens with Caffé Nero intently.

What will happen with CVAs is a rabbit hole for another time, but to the point I am trying to make – is leveraging your topco to get the best deal still the right thing to do as a landlord?

There is a lot to be said for knowing your tenant and how they perform at the site you have leased to them.

Are you not better to have a company that is tied to the site you have leased to them, that can’t be pulled down by mistakes made elsewhere? Look at The Restaurant Group.

It goes back to my point on transparency. If you know the turnover, you know what’s going on and you know it before it happens. It does mean that you are buying into that business and brand at the location, so as a landlord there is more on the line. I think that’s a good thing. Ownership for any mistakes will be clear to see.

Looking to those operators who are now looking to expand, as Baron Rothschild said:

“Buy when there is blood on the streets, even if it is your own.”

As an agent, we go again. We hit the pavements and we look for opportunities. I said in my last article that it was the worst of times for some, but the best of times for others.

What I have seen in the last eight weeks is that there are those that want to get on with it and be the pace runners. Yes, it’s risky but generally risky can give the biggest rewards. It worked for Rothschild.

There are also those that think they need to pause, and those that have had a company that has gone bust, but are now looking to re-expand under different ownership.

I am fortunate that the brands I work with are the ones that will re-expand. They are ready, they are looking and I’m banking on (and predicting) spring onwards is going to be big. I want to be part of it, and now is the time to have discussions. Time will tell.

In the retail and leisure sector, the elephant in the room is rates – this needs to be sorted out.

An online tax to me is part of the solution due to the rise of the online retailer. For bricks and mortar, due to the move to turnover rents, it is just not feasible to have a rateable value based on historical evidence.

For landlords, not only do you have zero rental income, you have a value based on pre-Covid levels.

The government made £25bn in 2019/2020 from this, so why would you want to change it if you were them?

Fundamentally it’s unfair, and a solution linked to turnover needs to be worked out. To get around retailers who divert customers to ordering online rather than going instore – if they are being taxed online at the same rate it should bring the consumer back to the high street for fashion.

Finally, the sector I predominately work in – hospitality – has been shafted by the government.

There are some great businesses out there trying to survive, that in January 2020 were in rude health and have now had a huge cash burn.

Many friends/clients of mine are holding on by the fingernails. It is genuinely heart-breaking to see Facebook, Instagram, LinkedIn and Twitter posts outlining the devastation to businesses, due to a problem that is not of their own making. They have spent money trying to make things safe when they are already low on cash.

The hospitality sector has taken a disproportionate hit, and something has finally been done. Dishy Rishi’s announcement of a £4.6bn package to help retail, hospitality and Leisure is welcomed, which could give up to £9,000 per property will go a long way to helping keep some above the waterline.

The unfairness of the pandemic does not just apply to tenants, but landlords too.

Not all landlords are fat cats. There are those that have worked hard and set aside money to enjoy retirement but have now been burned by CVAs. Let’s not forget a lot of these landlords manage our pensions.

It is unfair that they are being punished due to withholding of rent. I don’t have the answers to this one – it’s for someone who is far more economically sound than me – however I do think the solution is to have a voice in parliament.

The hospitality industry contributes £130bn to the economy, along with being the fourth largest employer with around 6 million direct/indirect jobs.

The petition (calling for a Minister for Hospitality in the UK Government) is now at 185,000 signatures at the time of writing and be accessed by clicking here. It is long overdue for us to have a voice in parliament.

In summation, the key drivers for the retail and leisure sector for 2021 are going to be as follows:

• The coronavirus vaccine
• Brexit
• Lease forfeiture moratorium
• Valuation
• Rates & online tax
• A minister for the hospitality sector

Even if you are in a hole, you need to adapt and move to a new way of retailing and trading.

Fortune favours the brave, and for those wondering whether they should or should not, this Theodore Roosevelt quote could be the best way to describe how 2021 will pan out for those still standing:

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

At Torridon we are there for the ride and looking forward to what tomorrow brings. We are firmly in the arena and wouldn’t want it any other way.