Alex Reilley: "The end of the moratoria will leave thousands of businesses horrifically exposed"

Reilley, whose all-day dining group operates more than 150 sites across England and Wales, says the end of the rent protections, which were introduced at the onset of Coronavirus pandemic in March last year, will leave thousands of lease-hold hospitality businesses that have racked up a year's worth of rent arrears 'horrifically exposed' to all manner of legal action.

"The cliff edge we are facing as a sector is not being highlighted strongly enough," he tells BigHospitality​.

"Loungers won’t lose any sites as a consequence of this, but there will be thousands of smaller hospitality businesses that will be horrifically exposed once this ends.

"On that day, you can bet your bottom dollar we’ll begin to see winding up petitions being served and landlords going down the nuclear route.

"But I don’t know, ultimately, how this gets resolved."

Currently set to expire at the end of March, the lease forfeiture moratorium prevents landlords from repossessing commercial premises if businesses are unable to pay their rent as a result of the Coronavirus pandemic

The debt enforcement moratorium, meanwhile, restricts landlords from pursuing aggressive forms of rent recovery such as statutory demands and winding-up petitions.

Reilley believes the moratoria should end, describing a further extension as 'just kicking an ever-increasingly large can down an ever-increasingly long road'.

However, he says the Government must intervene to find a resolution that protects both the tenants and landlords that have been unable to reach an agreement privately over arrears in the intervening months.

"The big issue you find at the level where we’re engaging with Government is that it’s not being talked about; it’s not a concern," he says.

"Currently, the Government's answer is to offer businesses CBILs (Coronavirus Business Interruption Loans) to cover the costs, but why the fuck should we have to borrow money off the Government to pay rent, after they’ve forced us to close.

"This is a delicate situation. I don’t think the resolution is in any way going to be clean, but they have to do something.

"The Government cannot just release the landlords and expect there to be anything but a bloodbath."

A 'glut' of CVAs​

Following the lifting of the moratoria, Reilley expects to see a  'phenomenal glut' of Company Voluntary Arrangements (CVAs).

"Many businesses will turn to CVAs as they can allow you to impose new terms onto landlords. And, as we recently saw with Caffè Nero, you can also write off tens of millions pounds worth of debt."

The impact of the pandemic has already led to to an immense number of the larger high street brands use CVAs to cut costs and, in many cases, reduce the size of their estates.

They include casual dining chains such as The Restaurant Group (TRG), which has closed 185 sites; Casual Dining Group (now known as The Big Table), which shuttered 91 restaurants; Azzurri Group, which closed 75 of its sites; and PizzaExpress, which has closed 73 restaurants.

"Clearly CVAs were never designed to be used in this way, so you can understand why landlords are enraged by them as they have no say," continues Reilley.

"All they can do is take their property back and try to find another tenant on potentially better terms.

"The majority of landlords will accept that is a fait accompli.

"However, for those businesses that don’t CVA and instead try to engage with their landlords to find a common ground; they’re the ones that will find themselves served with winding up petitions and legal action.

"They'll be the bigger victims because they tried to do the right thing."

Uncertainty over reopening​

Looking ahead to the coming months, Reilley says the focus for Loungers is to be able to reopen with as fewer restrictions as possible in place.

"Currently our modelling is focused on what cash flow will look like, with scenarios ranging from opening in March or April to a disaster-case scenario where we're not able to reopen until July," he says.

"The one thing that was pretty clear at the end of last year was that Tier 2 is pretty miserable, and I think we would rather stay in lockdown a little longer and open into Tier 1 than be obliged to open early under Tier 2.

“My concern, though, is if the Government gets hospitality open with the majority of businesses in Tier 2, they feel like they’ve done their job - and we could be held in those restrictions for longer than is necessary."

Reilley fears that unless the sector pushes for full reopening, then it could be stuck with some restrictions for years to come.

He notes that prior to changes in the Licensing Act in 1988 that extended permissible opening hours for public houses, pubs were not allowed to open between 3pm and 5:30pm; a rule that was originally brought in during the First World War due to fears over productivity in munitions factories during the afternoons.

"We’ve heard of licensing authorities really liking table service only," he says.

"And there's also been chatter about the prospect of winter lockdowns in the future because of the heightened risk and transmission rates spiralling; but we cannot accept restrictions like that in the long term.

"Ultimately, we want to do what we can to move back into a situation where social distancing is a phrase that people have to look up in a dictionary."