As we emerge from the pandemic it may present an opportunity for you to review your property portfolio and consider the immediate and future requirements of your business in light of the impact of lockdown. This article offers some pointers on where to start and key areas to consider when thinking about a review. For some health and care businesses there will need to be a change of strategy to support the future direction of the business but also to safeguard against the potential for similar events.
- Lease reviews. We would recommend a full review of ongoing lease renewals or perhaps renewals put on hold during the pandemic. This may assist in determining whether rent levels are sustainable, it might bring forward decisions to close certain sites or move a number of premises in one area into one strategic location.
- Rent reviews. Landlords have not been keen to instigate rent reviews during lockdown but as we emerge there may be pressure on them to do so from (including from funders). This may present an opportunity for occupiers to reduce rents or win incentives or payments for loyalty and the promise of a longer lease or an agreement not to exercise a break option.
- Break options. Terminating a lease by exercising a break option can be expensive so make sure you understand and can comply with any conditions in break clauses, make sure you have costed out potential dilapidations and compliance with other end of lease obligations.
- Business rates relief. Is there a possibility of claiming any rates or other relief available during lockdown if premises were not in use. Although this may be limited across a portfolio of tens or even hundreds of properties it can all add up.
- Consider growth strategies and reflect on priorities. Is your growth strategy or M&A programme still viable in light of current market conditions? Some healthcare business will take the opportunity to focus on optimising existing estates while other may look to take advantage of new opportunities in the market.
- Review of service charge and insurance expenditure. One way of controlling this expenditure is to carry out an audit of service charge and insurance expenses and if necessary challenging invoices and budgets and perhaps rebalancing the level of charges. Is the landlord getting best value and are the insurance premiums competitive?
- Sharing of occupation. If you now have surplus space in your property consider whether you can open this up and share with other partners and operators. There may be regulatory considerations and lease terms to comply with but most landlords should be supportive and sometimes sharing spaces with complimentary and similar services can bring benefits to everyone and the local community.
- Property sales, lease regears. Do you have freehold properties which you could sell and take a leaseback or do you have leases which can be regeared on the basis the landlord pays an incentive, as a way to unlock capital. Sometimes you are sitting on a valuable asset without realising it and it can go some way to help resolve short term cashflow issues.
If you would like to discuss any points mentioned in this article or would welcome a no obligation conversation without charge then please do get in touch. Our multi disciplinary team gives you the benefit of expertise in different areas such as corporate, real estate, regulatory and employment but with health and care sector expertise and our broad legal services offer.