House of Fraser landlords offered ‘unprecedented’ deal

By

Barbara Santamaria

Published
Aug 28, 2018

The new owner of House of Fraser Mike Ashley is reportedly asking some landlords to agree to receive no rent at all in an ‘unprecedented’ move for the retail industry.

Known as ‘meanwhile leases’, the rates only deal means that landlords would be paid no rent for their units, but House of Fraser would continue to pay their business rates and service charge.

This is according to a report from the BBC, which states that Mike Ashley’ team is presenting landlords with three different options in an effort to save more House of Fraser stores. Three stores have already been saved, including Telford, Plymouth and Oxford Street.

The options include receiving the same rent pre-administration, receiving rent equivalent to 5% of turnover at the store, and rates-only deals. Some 28 stores could be offered the latter, reported the BBC.

The mechanism would help landlords cover overhead costs, which they would have to incur if the store was left vacant. "A lot of these landlords will be staring down the barrel. They probably don't have a plan B so some will think this is quite attractive. They continue to trade, without the burden of business rates which gives them at least a year to come up with a plan. If the stores trade successfully, then there's always the possibility of a better deal with Ashley down the road,” a retail property expert told the BBC.

Mike Ashley has said he plans to keep 80% of House of Fraser stores open, however a spokesperson for House of Fraser revealed on Monday that some negotiations are not going well.

"Some landlords are being very collaborative in order to give us a chance at turning the business around, giving House of Fraser a lifeline and saving hundreds of jobs. However, some greedy landlords would rather see the stores close than help save the jobs of hundreds of people. We will continue to try and convince these landlords but ultimately time is running out. Some closures will be announced,” the spokesman said.

House of Fraser was rescued from administration earlier this month after Sports Direct founder Mike Ashley agreed a deal for the business.