New Look landlords accuse retailer of inconsistency as CVA teeters

Retail Week understands that, despite asking landlords to move to turnover-based rents on the vast majority of its store estate, New Look is not freely offering individual store sales data. 

As a result, landlords argue that it is impossible to make an informed decision on how to vote in the proposed CVA, while some claim the retailer is being deliberately obstinate in negotiations. 

One source said: “We aren’t adverse to a change in the leasing model. Nor are we blinded to the facts of what’s going on on our high streets. But where those changes are needed, agreements need to be reached through consensual negotiations.

“I’m not hearing a lot of lobbying from them. New Look isn’t offering individual store turnover data voluntarily. We’re being made to go to them and ask for it. That shouldn’t be how it works.”

New Look launched its CVA on August 26, asking landlords to switch to turnover-based rents of up to 12% for 402 of its stores, and to move the remaining 68 to nil rent.

Where landlords have obtained turnover information, another senior property source complained of discrepancies in the terms of what New Look was offering and asking for. 

“There’s a complete lack of consistency with low turnover stores on a higher rental percentage than other better stores, and vice versa,” he said.

“Some of the stores have turned over big numbers in the past – much bigger than the turnovers they are offering in the CVA.”

He also said many landlords remain concerned about the “bigger picture” of New Look’s remaining debt pile and “whether or not this CVA will truly resolve that”. 

One landlord also summed up the general worry among property owners of the precedent the CVA would set for other struggling fashion businesses, should it pass. 

“This isn’t just a short-term change that they’re asking for; it’s a permanent change. A permanent change not just to the way they will be paying rent, but the whole leasing structure. 

“What’s the precedent? If this goes through, is there going to be a queue of other struggling fashion occupiers who will all want the same thing?“

A spokesman for New Look refuted the accusations. 

He said: “Our comprehensive recapitalisation transaction, which involves a material reduction of debt, an extension of the company’s banking facilities and a cash investment of £40m, is contingent on support for our CVA proposal, which addresses the permanent structural shift in customer spend and behaviour from physical retail to online accelerated by COVID-19.

“Our landlords have given us valuable and constructive feedback since we initiated discussions in May regarding a required move to turnover rents. Our CVA proposal recognises this in a number of material changes we have made since our initial proposal, including enhanced landlord break clauses, unchanged service charges, minimum rent levels, and an elevated ranking of leases.

“With an estate of almost 500 stores and over 300 landlords, we have worked with our property advisors to reset our rental cost base to market rent through a turnover-based model.”

Over the weekend, The Mail on Sunday reported that up to 10 of New Look’s landlords had outright rejected its proposals. Should the CVA fail, one source told the Mail ”the fallout is most likely liquidation”. 

At the time of the launch, chief executive Nigel Oddy said the CVA was being undertaken out of “absolute necessity” and urged landlords to back it to keep the retailer afloat. 

The British Property Federation lashed out at the proposal, claiming it “fails to meet our best practice standards for CVAs and contains terms that property owners will object to.”

The date of the vote is set for September 15 and New Look will require the backing of at least 75% of creditors to push the CVA through.