Top tips when coming out of receivership or administration
Now more than ever we are seeing a growing number of shopping centres and other retail assets falling into receivership or administration - and for those already under this umbrella, the pandemic has either extended the process or in many cases lowered the valuation. This increases the chance of the next owner being someone other than a traditional player in this market and therefore meaning that the road out of receivership could be an interesting one where additional support is needed.
Fear not for we have compiled a handy list of top tips to help along the way!
You will see that the issues covered in this blog are not rare and in fact they are often part of the lifecycle of a retail asset - what makes the post-receivership period different (and difficult) is the combination of these factors having all been imposed on it at the same time.
1 - A new client - with or without a new strategy
Receiverships usually come to an end once the asset has been purchased by a new owner. This could be an institutional investor / more traditional shopping centre landlord, but given the current climate and the general decline in valuations you could just as easily find that your new client is completely new to investing in the UK retail market and this clearly needs to be approached in a different way.
One of the crucial questions is on strategy - does the new owner come prepared with a strategy and if not, how much support are they looking for from you to develop one? Either way, the knowledge and experience of the existing team will be crucial in developing the plan and moving the asset forward.
Another factor to consider is the managing agent - as again this may change dependent on the purchaser and how they want to operate the asset.
Whatever changes are made, the important thing is to get the new team assembled and working closely together (and pulling in the same direction) as soon as possible.
2 - The site team
Anyone who has worked on a property in receivership will tell you how gruelling it can be - and this is particularly true for the team on the ground who are managing the site day to day.
Often the onset of the receivership comes with little or no warning and can then lead to significant budget cuts, a quick change in expectations and even restructures or redundancies. Throughout this period and all of this change, the team will rightly be expected to continue to maintain security, cleaning and H&S standards and to support the receivers in continuing to drive income and keep occupiers happy.
All of this happening at the same time can be tough - and once the asset has been bought out of receivership it is important to support the team and allow everyone the time and space to take stock - you are going to need their skills and experience as you move forward!
Another important point to remember is that any restructure activity or reduction in the size of the team might have been exactly the right thing to do for the period of receivership - this doesn’t mean it will leave you with the right people in the right roles as you push the asset into its next period of growth and the team and structure should be one of the first things you review.
3 - Expectant occupiers
Occupiers can often be at their most engaged immediately after a sale - and arguably more so following a period of receivership or administration - remember that particularly for independent or local operators they have been through this with the asset - struggling as a result of any negative PR and dealing with the fallout from cuts to marketing and operational budgets.
The news that an asset has a new owner will be welcomed but there is also likely to be some apprehension about who the purchaser is, what strategy they are (or aren’t) armed with and what this means for their individual business.
Our top tip here is to communicate honestly with occupiers at all times and keep them up to date with progress - with the right information they can help to inform customers what is going on and can greatly assist in changing perceptions of an asset.
You can do this by keeping the site team abreast of developments and ensuring these are passed on through regular newsletters and occupier presentations / workshops.
4 - Service charge budget
It is more than likely that the asset’s operating budget will have been reduced significantly during the preceding period and this will be a major consideration for the new owner - similarly to the site team, what was in place for the receivership may simply not be suitable or sufficient to take the asset into a new phase of its life.
This does not mean that any budget cuts should immediately be reversed but it does mean that you should review the budget very carefully early on to see if there are things that need to be added back in.
Let’s take window cleaning as one small example! During the receivership period it may well have been OK to accept a slightly reduced standard - however if you are a new owner with a strategy to entice new premium brands to the asset, you are going to need to think carefully about how the whole place presents - not just to customers but also to prospective new occupiers.
You should find that anything health and safety related has not been cut and the asset should be fully complaint - other areas that may have been squeezed though might include PR & marketing as well time and money spent on developing the team and ensuring that occupier engagement is as strong and positive as it can be.
If you are working on a property that is has recently come out of receivership and you are looking for help with any of the issues mentioned above - contact us to arrange a chat about how we can help.
