Train companies seek bailout for station retail tenants

The UK’s train companies have tabled proposals to the government for an industry-wide package of rent cuts and payment holidays for station retail tenants after complaints over the lack of help during the pandemic.

Retailers said they have been asked to pay full rent in many stations by operators — including those directly or indirectly controlled by the government — despite a code championed by ministers to help landlords and their tenants negotiate affordable rental agreements in the wake of the lockdown. 

Many retail outlets on stations have seen revenues wiped out since March as people stopped travelling, forcing shops to shut during the lockdown. While some are reopening, demand remains much lower than before the crisis as passengers remain wary of returning to public transport.

The Rail Delivery Group, the body that brings together passenger and freight rail companies, last week sent proposals to the Department for Transport for an industry-wide solution. This would include changes to rents and payment plans to help tenants with current and future cash flows, longer term leases, and linking rents to passenger demand and footfall as passenger numbers recover across the network.

The proposals follow complaints from the retail industry. Last week, the British Retail Consortium trade body wrote to rail minister Chris Heaton-Harris asking why stations run by train companies, including those controlled by the DfT, had been among the most inflexible in providing help. 

Some outlets are reopening but demand is much lower than before the pandemic © Aaron Chown/PA

In the letter to the minister, Helen Dickinson, head of the BRC, said “this inflexibility runs counter to both the letter and the spirit of the code of practice for commercial property”.

“As landlord for a number of shops within railway stations, we believe that the government should abide by its own code of practice for these properties,” said one retail boss, who did not want to be named.

One train operating company said “their hands are tied as they are effectively run by the DfT and cannot take action to reduce rents”, according to the BRC.

The government controls the finances of franchised train operating companies under the “emergency measures agreements” (EMAs) set out in March, which transferred revenues and costs to the government in exchange for a management fee to keep the network running.

But as a result, operators say they have felt unable to offer widespread help for tenants, although some have been able to do individual deals with some retailers.

WHSmith, one of the biggest tenants at transport interchanges, has been proactively negotiating with the operators since the pandemic began, according to a person briefed on the process.

A DfT spokesperson said the train operating companies remained the landlords of their stations and had the ability to negotiate and agree rent relief with their commercial tenants.

Passenger numbers have been badly affected by the crisis and many people remain wary of travelling on public transport © Simon Newman/Reuters

“We have reminded operators that they are obliged to consider any requests for rent deferral or relief, should do so on a case-by-case basis, and encouraged them to develop bespoke future lease terms for tenants at stations.”

But the DfT has also asked the operators for proposals over rent relief “to ensure a consistent and fair approach is being taken, which promotes the reopening of station tenant premises and ensures their sustainability, protects tenants and offers value for money to the taxpayer”.

Outside the train operating companies, some landlords on the rail network have introduced measures to support tenants, with Network Rail — which manages the country’s rail infrastructure and controls 20 stations — and Transport for London waiving or discounting rents for the period of lockdown. The rest of the 2,500 stations in the UK are managed by train operators, although about half are small and unstaffed stations with few or no retail outlets.

“We’re operating under EMAs, [so the government] have control over finances and they will make the final decision,” said one person close to the talks.

Additional reporting by Jonathan Eley

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