Turnover Leases – Practical & Legal Considerations

On 16th March 2021 we held a webinar with DAC Beachcroft.

In our panel discussion we considered how turnover leases can underpin strong partnerships and secure income. The webinar was recorded and covered the themes listed below:

1. The Retail landscape and what Quintain learnt from its outlet centre experience

Matt Slade from QUintain gave his perceptions of what’s happening in the sector and how that may impact the development of new lease forms before talking about Quintain began to adopt turnover leases at London Designer Outlet

2. Why are turnover leases needed in the short and long term? /How do you make a turnover lease that is fit-for-purpose?

Mark Phillipson and Dan Mason from Total Turnover Solutions discussed

  • Firefighting vs long-term application
  • Completeness of information
  • How is turnover data captured and used to assist the asset management of retail schemes and how is the information used in the preparation of centre business plans?
  • What should they encompass?

3. Legal implications/structuring

Alison Key and Clare Hartley from DAC Beachcroft discussed

  • What are the issues that your clients are talking about the most?
  • What are the implications on the organisational and operation structure of the Asset Manager and Property Manager compared to that of a traditional leasing structure?
  • What are the key factors to consider?
  • How can a Turnover Lease protect the Landlord’s position?

4. Investment

Mark, Dan and Matt commented on the following

  • How will investors/funders be reassured on the impact on their valuations through this model?
  • Will transition to this model help investors achieve an exit from retail assets?
  • Will shopping centres have more sustainable income and do you see them becoming a more attractive asset class again.
  • Will the turnover model suit all retail assets/units?
  • Ratchets?

5. Closing questions & Key Takeaways

  • How can turnover leases capture the contribution that physical stores is click and collect and returns treated in the rental formula?
  • How can Landlords be sure that retailers are supplying the correct turnover information and what checks and balances are in place?
  • Each panellists to give a one-liner on what they feel is the most important matter to consider around turnover leases.

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