The biggest property companies of London have warned the chancellor of the risk to financial stability if banks and lenders do not urge to show flexibility towards landlords no longer receiving rent.
The London Property Alliance(LPA) represents more than 420 property companies with interests in central London.
According to LPA, the “survival prospects” of many of these companies are at risk. Companies are facing a sharp fall in rent payments due to the coronavirus crisis. Many landlords, including Hammerson and Intu, reported a fraction of expected rent paid at the end of March. The landlords fear of breaching debt covenants. Hence they could ultimately lead to repossession of their assets by lenders.
Property Companies suggested to avoid a repeat of the 2008 crisis
Brian Bickell, chief executive of Shaftesbury, which owns Carnaby Street in London’s West End, said:
The government should avoid a repeat of the 2008 crisis where banks repossessed properties. Lenders could step in and seize their securities and that would mean businesses wouldn’t know if they can re-open again. Our aim is to come out of this with as many businesses remaining open as possible. But we need to get the flexibility from lenders. We do think this is important for financial stability as a whole.”
Charles Begley, executive director for London Property Alliance said: “We are not calling for specific legislation to tackle this issue, just unequivocal political support and a concerted effort to ensure the finance industry, which encompasses the full range of funders and lenders beyond the big banks, is explicitly advised to grant property owners the flexibility they require.”
The London Property Alliance calls for a review
The London Property Alliance is also calling for a review of the business rates holiday for unoccupied buildings, as the suspension of the 12-month rate currently only applies to occupied space.
Melanie Leech, chief executive, British Property Federation, said: “The government needs to decide how it will deal with another quarter of very limited cash flow coming into the system from occupiers to landlords to lenders, and deal with it either by injecting capital into the system or writing off debt in some way.”