Landlords will shoulder the financial burden of River Island’s restructuring plan, says a landlord finance expert.
The High Street fashion brand has been given the green light to close 33 stores across the UK after the High Court approved its restructuring plans.
The retailer had warned creditors it could run short of cash within weeks if its turnaround proposal was not approved.
As well as closures, rents will be reduced at a further 71 branches as part of the plan which River Island chief executive Ben Lewis says “will enable us to align our store estate to our customers’ needs”.
Negotiations will begin shortly with landlords.
However Mark Cunningham – a partner at audit, tax and business advisory firm, Blick Rothenberg – says: “While River Island avoids imminent administration, landlords face a significant reset of their income and asset values.”
He continues: “Increased staffing costs due to the National Minimum Wage and National Insurance Contributions (NIC) rise are not only impacting employers, but also the landlords they rent their premises from. Today’s ruling confirms that commercial landlords are being asked to take a big financial hit for retail survival.”
He adds: “The implications are severe. Rent reductions will flow through property portfolios, undermining valuations and complicating any refinancing efforts. While landlords may appeal, the cost and uncertainty of doing so may outweigh the potential gains.”
And he concludes: “This verdict further highlights the need for government intervention.
“Sector specific support such as rates reform, VAT reductions, and NIC holidays could help stabilise the retail sector. Without it, landlords may find themselves absorbing losses with little recourse, even as retailers struggle forward.”
This article is taken from Landlord Today