The British Property Federation has hit out at House of Fraser after the beleaguered business revealed it plans to launch a CVA next month.
As Retail Week reported yesterday, House of Fraser intends to launch a company voluntary arrangement in June.
Should the restructuring of its portfolio go ahead, the department store operator would then secure fresh investment from C.Banner.
The Hamleys owner would acquire 51% of the business from Nanjing Cenbest, part of the Sanpower conglomerate.
But after House of Fraser unveiled details of its plans, the British Property Federation (BPF) hit out at the “insensitive” way in which the retailer had handled the process.
The BPF’s director of real estate policy Ian Fletcher said the retailer had not followed “best practice” after failing to discuss plans with landlords beforehand.
Fletcher hinted that, as a result, landlords could vote against the CVA when it is formally launched next month, or vote in favour of it “grudgingly”.
He said: “Landlords are particularly compromised by the CVA process, as a CVA allows retailers to rip up contracts freely entered into. It is an insolvency process where pensioners’ savings, invested in property, are at risk and therefore it is not victimless.
“Over the past few months landlords have supported several CVA proposals, where discussions have taken place before the restructuring business has gone public. This allows for a constructive dialogue, but House of Fraser has not followed this best practice.
“We think any discussions on this CVA will therefore be awkward and any support for the CVA given grudgingly”
Ian Fletcher, BPF
“The understanding landlords have shown on a couple of previous CVAs we think will therefore be absent, because of the way this has been handled.
“Announcing the CVA via a statement on new investment, whilst helpful to the overall continuation of the business, is highly insensitive when you are asking property investors to absorb large losses.
“We think any discussions on this CVA will therefore be awkward and any support for the CVA given grudgingly.”
Revo – formerly known as the British Council of Shopping Centres – also waded into the debate last night.
Its president Mark Williams said the CVA process was “being increasingly used by companies in order to extract themselves from property contracts they willingly entered into”.
Williams added: “The result is property investors, often the very pension funds of many of the shop employees, and the shop staff, lose out, while the owners of the business take no direct pain. Further it creates an unfair playing field for those retailers who have traded successfully and stick with their contracts.
“For town and city centres to thrive the government needs to take urgent action on rates, how it treats online retailers and an examination of the fairness and use of CVAs.”