Property Week - October 9, 2009
B&Q and British Land have agreed a landmark lease transaction that will enable the retailer to reduce its costs and the landlord to improve property values. B&Q has reduced its rent by 10% at seven of its warehouse-format stores, in return for extending the lease length. The new arrangement allows B&Q to reduce its rent by 10% in exchange for taking on new 20-year leases with no breaks and rents linked to the Retail Prices Index (RPI).
After the 10% reduction the average rent is £14.85/sq ft. The transaction also includes a new lease at a mini-warehouse at Cwmbran in Wales. British Land bought the seven B&Q stores in a £198m purchase and leaseback in 2005. The seven stores total around 700,000 sq ft. B&Q has 330 stores in the UK and Ireland.
Iain Small, B&Q’s director of property acquisition and management, said: “This regear is in line with our company-wide policy to reduce costs across the business. We have achieved an immediate 10% rent reduction across seven key trading stores.” John Madison, director at British Land, said: “This meets our strategy to drive values and shape the portfolio into well-let, long-term investments.”
Martin Supple, joint head of out-of-town retail at Cushman & Wakefield, said: “This regear is a win-win solution for both parties. It shows opportunities exist in the current market for landlords to sit down with key tenants and find ways to help them reduce costs, while still enhancing their own capital asset value.”
B&Q hopes to enter into similar arrangements with other landlords. It believes that, by offering something in return, landlords will agree to a rent reduction. Parent company Kingfisher last month reported that B&Q’s UK and Ireland sales were up 1.2% and profit was up 66% for the 26-week period to 1 August, compared with the previous year.
David Childs, director of B&Q Properties, is to leave the business after 17 years. His responsibilities will be divided among the existing team.
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