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The Changing Face of High Streets - What Are CVAs and How Do They Affect Watford?

on Wednesday, 26 June 2019.

The rise of online shopping and the uncertainty over Brexit have caused many retail chains to struggle. In Watford, BHS closed down a few years ago, Debenhams is in trouble, and now Philip Green's Arcadia empire is suffering.

Arcadia owns Topshop, who has a store in Watford's Intu centre. Arcadia has recently agreed a Company Voluntary Arrangement (CVA) - what is it?

A CVA is a rescue procedure whereby a company in financial distress persuades its creditors to reduce its debts and liabilities.

In order for a CVA to be approved, a retailer must secure at least 75% creditor approval. As landlords make up a large percentage of unsecured creditors, their support is usually necessary, which can prove difficult. Does the landlord agree to reduce the rent to keep the tenant viable and occupying the shop? Or does it refuse, which could force the tenant out of business, with an empty shop and no rent at all?

The landlord must also balance the interests of the rest of its business. If it reduces the rent for one tenant in a shopping centre, then what about the other shops in the same centre? Will they also want to have their rents reduced? Will potential new tenants of empty retail units drive a harder bargain when negotiating their leases?

Intu voted against the Arcadia CVA, but they were outvoted by the other creditors. Topshop was saved and will continue to trade in Watford, but Intu will suffer from reduced rents.

Will this be the end of bad news on the high street or will there be further problems?

For more information, please contact David Marsden in our Commercial Property team on 01923 919 303.