The tough stance taken by some Arcadia Group landlords forced owner Sir Philip Green to invest more in the business to ensure the controversial company voluntary arrangement (CVA) passed, industry experts have claimed.
Agents close to the negotiations told Drapers: “Pension funds and Intu should be given a lot of credit for absolutely sticking it out, and fighting for the employees of Arcadia.
“[Landlords] have negotiated hard and successfully – those who voted for or against [the CVA] – and their efforts mean more money is going into the business. That means more for pensions, more jobs being saved and the company has a better chance [of survival].
“Arcadia is in better shape today than it was last week, and there’s a better chance of success. Credit should go to property companies who stood their ground and negotiation hard with [Arcadia].”
The seven separate CVA proposals were voted through at a meeting on Wednesday after several hours of deliberation. Arcadia had originally planned to hold its CVA vote on 5 June but postponed the process to “conduct further dialogue with a few landlords”, delaying the vote by a week.
Following the adjournment Arcadia revised several terms in the CVA, reducing the rent cuts from between 30% and 70% to between 25% and 50% for landlords affected by all seven of the CVAs.
The cost of this amendment is to be funded by the group’s shareholder, Lady Green. In the first year, the initial cost is expected to be around £9.5m.
Drapers understands that landlords including Landsec, Hammerson, British Land and Aviva voted in favour of the CVA proposals.
Intu confirmed that it voted against the CVA. In a statement the landlord said: “Our rationale for this vote is clear: we firmly believe that the terms of the Arcadia CVA are unfair to our full rent-paying tenants and not in the interests of any of our other stakeholders, including Intu shareholders and the 130,000 people whose jobs rely on the success of our prime shopping centres.
“While we are disappointed with the outcome of today’s vote, we will work constructively with Arcadia to achieve the best outcome for both sides.”
Another industry expert backed landlords who had voted against the deal: “If you are Intu looking at Arcadia, they went public and made a very brave decision to say, ‘We would rather take our chances with administration than accept rent cuts you’re proposing.’
“Commercially it’s right to say they’d rather risk administration than see their rents slashed, otherwise Intu don’t have a business.”
Drapers understands that negotiations to secure enough votes to pass the CVA were held long into Tuesday night and Wednesday, and even small landlords received calls from senior Arcadia directors to encourage them to vote for the deal, which was passed on Wednesday afternoon.
One property agent involved in the negotiations who represented a small landlord said: “Late on Tuesday evening we took a call from a senior director [from Arcadia] asking us which way we wished to vote. Arcadia were scrabbling around to try and get landlords on side.”
However, one landlord said that contemporaries should accept that rents will be lower, with or without CVAs.
He said: “In the short term a lot of people aren’t going to lose their jobs and that is important. From a real estate investor perspective, there are enough shops coming back [vacant]. [The CVA] keeps occupancy up a bit – you have to pay the price for that. The flipside is that landlords have done rather well over the past 20 years with material amounts of rent increases.
“The whole rental system where every retailer can afford the same level [of rent] is a broken model. If landlords aren’t happy with reduced rents, they have the ability to break [the lease] further down the line.”
Drapers has contacted Arcadia for comment.