As the Covid-19 pandemic took root in the UK, the outlook for real estate and retail looked bleak. The government was forced to act by taking drastic measures, issuing pleas for people to work from home and closing non-essential retail. Within a few days in March 2020, thriving and bustling retail and commercial hubs were reduced to ghost towns.
Eversheds Sutherland advised one of the largest real estate companies in Europe, Land Securities Group (Landsec), as it worked to protect its £10.8bn portfolio of retail, leisure, workspace and residential hubs, through this volatile and unpredictable crisis.
Landsec owns numerous, high-profile sites across the UK, including the Piccadilly Lights in the West End, the regeneration of London Victoria, and retail destinations at Westgate Oxford and Trinity Leeds.
Even when non-essential retail was allowed to reopen, Landsec was naturally concerned that tenants would not have the financial wherewithal to survive a recovery. Tenants, short of footfall to drive revenue and exposed to the same costs of running a business pre-Covid, were considering their options. If too many tenants left their premises, Landsec would be exposed to empty lets, the dreaded “void period”, and would not receive any rental income, the elixir of commercial real estate.
That would have been a disaster not just for the value of Landsec’s portfolio whose value is derived from lets and rental income, but also indirectly due to its potential on the health of the UK’s savings and pensions market. Pension schemes typically invest 10-12% into commercial property, with an estimated £45bn of UK savings and pensions dependent on commercial rents being collected. If Landsec’s model lost significant value, or worse, failed, the knock-on effects across the economy could have been catastrophic.
Landsec required urgent legal support to help implement its £80m customer support fund. The fund offered a collaborative solution for tenants, helping as many of them as possible to continue trading on terms that would not put their businesses at risk.
Eversheds Sutherland fielded a multi-office real estate team to take on the challenge. Led by partners Tom Goldsmith and David Jones, alongside senior associates Charlotte Haigh and Chris Mullings and flanked by 30 associates, the team pursued an ambitious programme of rent concession agreements dramatically changing tenants’ leases, with new agreements reassessed and evolving as the pandemic grew.
Landsec gave Eversheds Sutherland the sole mandate to conduct all rent concession work for all assets within its portfolio, regardless of whether another of its legal panel firms managed the building or site. This was not just a case of drafting in lawyers to work long hours to get the job done. The nature of Landsec’s business, portfolio and structure required a legal team with knowledge and deep-rooted client relationships. The lead team collectively has advised Landsec for more than 50 years, giving them intimate insight into the business and a platform to get to the root of Landsec’s challenge.
Haigh, principal associate on the deal, had advised Landsec for more than 10 years, including a 10-month secondment to the in-house legal department. Her familiarity of working with them ensured the procedures the team set up to deal with the avalanche of instructions dovetailed with Landsec’s internal processes. This crucial knowledge helped interpret deals agreed by different asset managers across Landsec, and to convert them into something both Landsec and its tenants were happy with.
Haigh joined Eversheds in 2015, following her secondment with the Landsec legal team. Prior to that she trained at Trethowans in Southampton and Salisbury, and then moved to London to work at Nabarro on qualification in 2011.
Reflecting on the deal from maternity leave, Haigh describes the unique context of deal and how it reflected the extreme conditions of the pandemic. “There’s been a huge amount of uncertainty, including for businesses, and being part of a project for one of my favourite clients which helped to keep most of their tenants in business during this time was very rewarding”, she says. “This deal showed me how much I enjoy the challenges of managing a larger team on a complex project, so I will certainly have the confidence to put myself forward for similar roles when I return from maternity leave.”
The team drafted in the real estate practice’s legal technology and analysis team, in the first instance to conduct a digital review of affected leases. From there, a digital framework was devised to negotiate individual rent concessions with individual tenants across Landsec’s vast portfolio.
“For me, what will make this project stand out is that the Landsec rent concession project grew out of assisting our (extremely busy) Birmingham team on a rent concession review”, Haigh explains. “What started as a few rent concession letters in the early days of the pandemic grew into a huge project across our Birmingham and London teams, as the pandemic continued and ever more complicated agreements were made between landlords and tenants, all with the intention of ensuring that the tenants would still be in occupation and able to trade when lockdown was lifted. We constantly had to react and adjust as the pandemic continued and government guidance changed”
As concession instructions came in thick and fast, the team expanded to manage all the documentation that needed drafting. Managing all the instructions, the increasing list of lawyers involved, and the status of each matter would have been a full-time job for one person. However, the team deployed an innovative solution, introducing a bespoke matter management tracker for all concession matters past and present, both simple and complex, which could be updated by multiple users at the same time.
Concessions are incredibly complex matters. The team, working in collaboration with Landsec and its tenants, created unique new terms that tied rents to revenue based on businesses’ financial footing and ability to trade. These agreements evolved as the pandemic went on: the team could not rely on one standard form template or precedent from one tenant to the next. When the UK re-entered lockdown or businesses were forced to operate under new restrictions, the team responded by re-writing the concession rulebook.
The complexity was compounded by the unpredictable challenges of documenting reversionary leases, deeds of variation and supplemental documents, at double-quick speed to meet Landsec’s evolving needs and by the need to respond to tenants who were considering exercising their break clauses if concessions weren’t settled.
Landsec and the Eversheds Sutherland worked together to embrace technology and take advantage of the rise of DocuSign, which has revolutionised the way documents are signed and completed in the last 18 months. In conjunction with this project, Eversheds Sutherland helped Landsec develop its own policy and processes in using DocuSign to electronically execute most of its documents.
The team advised on more than 800 rent concession agreements, across more than 300 different sites within Landsec’s vast portfolio, a gargantuan team effort. In doing so, they ensured retailers could continue to trade on favourable terms, and Landsec reduced void periods to the lowest level possible, preventing a collapse in the value of its portfolio.
Working closely with Landsec throughout, the team regularly met with people across its business to drive through this pandemic-resilient programme of rent concessions. In collaboration with Landsec’s legal team, led by legal director Ian Petts, the team responded to changing requirements from government guidance to develop new approaches with the client and reflect them in Landsec’s many tenant precedents.
“Under a large volume of work, we had to constantly review and adjust our documents to reflect feedback from individuals ranging from the portfolio directors at Landsec, in relation to how they wanted turnover provisions to work, for example, to the more junior members in our team, who were working on the first draft of many of the letters”, Haigh explains. “Having a structure, albeit a flexible one, in place and a procedure that the whole team followed was the only way to keep on top of this number of instructions.”
Moreover, Haigh says it was important not to regard Landsec as acting ‘against’ the other parties. “This project was a collaboration between Landsec and their tenants/customers, so it would have been hugely unhelpful to spend time arguing over points which neither side wanted their lawyers to fight tooth and nail over”, she says.
“Finally, approachability – I’ve no idea how many calls I had from asset managers wanting to discuss how the documents would work for their particular tenant and from the team wanting to be sure that their drafting reflected what the client had instructed. In almost all cases a quick conversation was the best way to get to the bottom of any queries. We can all be guilty of sending hundreds of emails a day now, but I think it’s often more efficient to speak to people directly.”
Haigh recalls that as the pandemic continued to unfold, the client’s approach adapted as it became clear quite how challenging the pandemic was for their tenants. “Drafting for this was reviewed by an Eversheds Sutherland lead team with vast experience in turnover rents and then reviewed line by line with the client, to ensure we were reflecting exactly what they wanted. Prior to the pandemic, turnover arrangements were not popular (except for some restaurants and outlet stores) so it was essential to make sure that those within the Eversheds Sutherland business with any recent experience were involved and that the principles were properly understood”, she says.
Previously, Haigh had worked for Landsec to help secure vacant possession of property in Victoria before the Nova development started, she advised on high profile lettings at The Shard, selling the Adelphi building, and on Segro’s £133m acquisition of Electra Park.” I really enjoy the asset management side of the job since you get to know the asset managers and properties over a period of time. I think I’ve worked on too many Landsec and Segro lettings to count them all but it’s the people you work with on a regular basis that really make these transactions enjoyable”, she says.
Looking back on the pandemic, she admits there were challenges. “The quick question junior members of the team might have popped over to ask in the office, suddenly became a scheduled Teams meeting, which newer members of the team might hesitate to arrange”, she recalls.
However, she adds: “Teams has been fantastic, and I was already working from home two days a week before the pandemic so I’m grateful, and definitely see it as a benefit, that this has become more widely acceptable, but I do also really enjoy the social aspect of working in the property industry, so am very much looking forward to a return of face-to-face meetings under the new blended office environment. The pandemic also encouraged the industry to properly embrace e-signing which has meant that these rent concession letters could be signed and circulated quickly once they were agreed.”
About Charlotte Haigh
2019-present: Principal associate, Eversheds Sutherland
2016-19: Senior associate, Eversheds Sutherland
2015-16: Associate, Eversheds
2011-15: Associate, Nabarro
2009-11: Trainee solicitor, Trethowans
Who’s Who: the Eversheds Sutherland team
Partners: Tom Goldsmith, David Jones
Principal associate: Charlotte Haigh
Senior associate: Chris Mullings