realestate

Boots’ ‘unethical and unpalatable’ rent stance draws fire


Boots is facing accusations of using the UK’s moratorium on evictions during the pandemic as cover for aggressive lease renegotiations.

Although the high street pharmacy chain kept most of its more than 2,000 stores open throughout lockdown, it is withholding rents and service charges, according to several landlords.

“They are trying to take advantage of the moratorium just like everybody else,” said one commercial real estate adviser, who added that the company’s large estate and comparatively long average unexpired lease term meant that its overall store occupancy costs were likely to be high.

Although Boots is not alone in seeking rent cuts — JD Sports has been notably robust in its dealings with property owners — landlords contrasted Boots’ hard-nosed attitude to a previous consensual approach. “Back in the day, they were part of the fabric of society,” said one landlord. Another described the company’s stance as “unethical and unpalatable”.

Boots said it was “continuing discussions with some of our larger commercial landlords on options for rental and service charge payments in light of the Covid-19 pandemic”.

“We stayed open throughout the pandemic to provide a pharmacy for the patients who needed us, but retail footfall across our estate significantly reduced and trading has been severely impacted” it added in a statement.

In the three months to the end of May, the company reported a 48 per cent year-on-year decline in same-store retail sales. Pharmacy sales fell 1 per cent, and the company said it was accelerating a restructuring plan that was likely to result in 4,000 redundancies. Walgreens Boots Alliance, its US-listed parent company, booked a $2bn impairment charge against Boots.

Even before Covid-19, the company was under pressure after the NHS cut the fees it paid pharmacies, while supermarkets, discounters and department stores nibbled away at Boots’ market share in beauty and personal goods.

In May 2019 it disclosed plans to close about 200 mainly smaller stores, mostly to remove duplication and overlap. About 75 have shut so far.

“The rapid change in retailing . . . means that we must now put our relationship with our landlords on a more modern and equitable footing,” Boots added. “Whilst we have reached revised agreements with many landlords, where discussions are ongoing we have paused some payments as we look to agree fair and equitable solutions.”

Although it is understood the hardball stance affects less than half of Boots’ 2,400 stores, another real estate adviser said that he “hadn’t spoken to a single Boots landlord who is being paid”.

The UK government in April barred commercial property owners from pursuing evictions of non-paying tenants, and last week extended that moratorium until the end of December.

“Landlords effectively have to suck it up,” said the first adviser. However, he added that Boots was “far too well financed” to force rent cuts using a company voluntary arrangement, an insolvency process used by retailers such as New Look and Poundstretcher.



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