Several Arcadia landlords felt forced into accepting the group’s controversial company voluntary arrangement (CVA), to stave off the threat of its collapse into administration.
The seven separate CVA proposals were voted through at a meeting this afternoon, after several hours of deliberation.
Property sources said landlords had no choice but to support the CVA, as a fall into administration would have been “disastrous”.
One landlord who had representatives at the vote said: “This has been a media campaign to make landlords feel bad about causing redundancies. We’ve had some correspondence with a fairly emotionally blackmailing tone.”
A property consultant told Drapers: “[Arcadia boss Sir] Philip Green has been playing Russian roulette with landlords to get them to approve the CVA – saying it would otherwise go into administration.
“The group knew lots of landlords couldn’t afford to have that scenario, so it was purely fear-factor play.”
He added: “There is also a political overlay to this, which was the pension scenario. The Pensions Ombudsman clearly feared there was a possibility for an administration and accepted the deal. This put further fear into landlords, who begrudgingly decided that they couldn’t afford not to accept the CVA.”
Another property consultant said the decision for many landlords was a moral, as well as a financial one: “They had to weigh up the outcomes both personally and in a broader sense. Do they want to be the party that costs 18,000 people their jobs?”
Arcadia landlords, including Intu Properties, British Land, Hammerson and Landsec, had been at loggerheads over whether to back the controversial rescue deal.
As a result, the group postponed its CVA vote to “conduct further dialogue with a few landlords” and then revised the rent reductions set out in its CVA proposals, in a bid to win landlord support.
Intu said on Monday that it was still planning to vote against the CVA.
One landlord said: “The conclusion I can make is that one of the big landlords must have buckled. I don’t think the new rent adjustment agreements made much of a difference.”
A spokesman for investment bank PJT, which was negotiating with Arcadia on behalf of British Land, Hammerson and Aviva, said: “On behalf of a group of landlords, we engaged with Arcadia early in the CVA process, with the aim of agreeing terms on a consensual restructuring – an approach that altered many of the CVA terms to produce a fairer outcome for all landlords and stakeholders.
“The focus from management must now be on Arcadia’s store and multichannel investment strategy and ensuring the business is in the best possible position for the future.”
Another Arcadia landlord said the rent cuts are necessary: “I’d rather take a hit in rent than have it empty. Rents are coming down, either through this process or through expiry.
“Landlords have been living in a parallel reality where the rents they’ve been demanding are not viable. The sooner we get back to sustainable rents, the sooner we can all get on with things.”
However, the director of another property consultancy said: “It’s a question of damage limitation. There will be some who believe something is better than nothing.”
Retail analyst and author of Retail Therapy: Why The Retail Industry Is Broken – And What Can Be Done To Fix It, Mark Pilkington said: “Arcadia’s CVA was a complex deal to get passed, because the group is not one company, but actually seven separate entities, and therefore it proved hard to get the required 75% approval in all cases.
“Normally the position of the pension scheme is pivotal, and Green had ensured its support by offering to put £25 million in as a top-up. However, the scheme is not a creditor to all of the entities in this case, and therefore its vote was less decisive.”
Richard Lim, chief executive of Retail Economics, said Arcadia was far from safe, and the CVA was the “last resort” in trying to keep it alive.