The pension fund manager – which partly owns schemes such as Leicester’s Highcross development and Milton Keynes shopping centre – has agreed to end the archaic requirement for rents to be paid quarterly in advance. Instead, it will offer to scrap existing lease terms and introduce more flexible conditions, including monthly rents. The offer is open to all its retail tenants.
Hermes chief executive Rupert Clarke told The Financial Times: “There is a time/value of money cost from not getting the money in advance, which is a relatively small amount that will be added to the head lease. What we are doing here is standing up so that there is a different and clear view of the alternative.”
The move follows a campaign of lobbying led by Arcadia boss Sir Philip Green and Carpetright founder Lord Harris for more flexible leases. The campaign was backed by many non-food retailers and discussions with landlords were understood to be ongoing.
Retailers insist that quarterly payments place a further financial burden on their cash flow and that landlords need to be more flexible in the difficult economic climate. Some landlords have conceded this for new leases, but there has been no movement on existing leases.
The move comes just days before the next quarterly payment day on September 29.
Retailers are likely to pay slightly more for monthly rents. Hermes estimates the extra cost at between 0.5 per cent and 1 per cent of the rent. There will be an extra administrative burden, which the landlord will counter by moving to electronic payments by direct debit.