London Soho Landlord Sees Tenant Exodus as Second Wave Hits

(Bloomberg) -- London landlord Shaftesbury Plc is asking lenders to extend debt relief after an exodus of tenants caused a spike in vacancies and as the capital braces for a resurgent coronavirus.

The company, which owns properties in Soho, Chinatown and Covent Garden, said its vacancy rate jumped to 9.7% at the end of August, more than double the level in March, in a statement Friday. Shaftesbury said it was too early to assess the impact of the government’s recent reintroduction of restrictions that saw bars and restaurants forced to close earlier.

“The course of the pandemic in the short and medium term will continue to dictate the extent of restrictions imposed by the U.K. and other governments to contain the spread of the Covid-19 virus,” Chief Executive Officer Brian Bickell said in the statement. “As an international destination, local trading conditions in the West End will inevitably be affected.”

The company’s shares fell as much as 2.6% in London trading.

Shaftesbury is in talks with lenders to extend waivers on loan agreements and also shelved its final dividend after collecting less than half the rents owed from its restaurateurs and store owners in the six months through September. It blamed a collapse in demand for the rental apartments that sit above its stores and restaurants for the surge in vacancies.

While most of the company’s 611 businesses have reopened, Shaftesbury has now extended rental relief measures to tenants until the end of the year.

Shaftesbury’s Horrible West End Year Just Got Worse: React

Shaftesbury’s portfolio is made up of stores and restaurants that dot some of London’s busiest tourist streets. In many areas its buildings are interspersed with those owned by other investors, often private families that are reluctant to sell. The company said it was seeing more of these properties being put up for sale during the pandemic and has so far bought three additional buildings in Soho for 13.3 million pounds ($17 million).

The company’s mix of mainly independent retailers and restaurants was a source of strength before the pandemic started, as the vibrant streets it manages continued to attract vast numbers of tourists and shoppers even as main street U.K. retail suffered.

That’s turned into an Achilles heel during the pandemic as visitor numbers have plunged, with the small operators that run the bars and boutiques of its West End heartlands among the most vulnerable businesses to the sudden collapse in visitor numbers.

“The effective closure of the West End, starting in February, had an immediate and very challenging impact on all consumer-facing, footfall-reliant businesses, which are inevitably cash-flow sensitive,” the company said.

©2020 Bloomberg L.P.