Sweet Dreams for trade creditors but nightmares for Landlords

The news (Private equity firm pays Dreams' creditors) that Sun European has paid 75p in the £1 to trade creditors of Dreams, which it acquired from the hands of administrators in March is great news for those creditors.  But unfortunately the story for landlords is not so good - no such pay out for them. 

The commercial logic is obvious - in order to continue trading Dreams needs its suppliers to continue to supply.  Whilst there was no legal basis for those debts owed by old Dreams to be paid by new Dreams the ability of those suppliers simply to stop supplying puts them in a strong negotiating position and in this case they have achieved a result which is not bad.  Landlords, on the other hand, don't generally have the ability to stop supplying in a way that can impact the whole of the business.  At best a landlord may have a few sites and thus be able to negotiate a position on lesser performing sites by leveraging the better sites.  But in most cases the negotiating position is pretty much a one way street. 

It is this unlevel playing field that means landlrods consistently feel they are getting a raw deal on administrations.  Unfortunately it is the very nature of Real Estate that creates this unlevel playing field.  I wish I had an easy solution which could level it out but I have to admit I struggle to see a path at this point.  So for now I predict whilst trade creditors may get some sweet dreams most landlords will continue to suffer nightmares!

Peacocks sold: Seduction again?

Those familiar with my blog will remember my relatively recent blog entitled Blacks and La Senza: Agression v Seduction.  Today we are met with the news that Peacocks has finally been sold out of administratio to Edinburgh Woollen Mill.  This is good news, especially for the 6,000 people whose jobs have been saved and the 338 landlords whose stores will remain open.  It is less positive for the 3100 people who will lose their jobs and the 224 stores that have ceased trading with immediate effect.

A quick note to landlords of those stores - the oft-quoted decision in Goldacre may not assist you in getting your rent paid up to the next rent payment date.  This is because the decision left it woefully unclear what the position was where a company went into administration after a rent payment date - is the rent or any part of it an expense of the administration or can the company in administration effectively trade rent free?
But do not despair completely for it appears that Edinburgh Woollen Mill has adopted the "seductive" approach to its acquisition vis-a-vis landlords.  Philip Day, chairman and chief executive of the Edinburgh Woollen Mill Group, based in Langholm in Scotland, is quoted as saying that he hoped there would be scope to save more jobs and stores from those being forced to close due to performance issues and overhead pressures.
This is a clear statement of intent that once they have had the chance to review all the numbers they will identify further sites they wish to re-open and dangle in front of landlords the carrot of some rent.
Does this mean that seductive approach is now preferred over the aggressive approach or is this just a hangover from Valentine's day?  No doubt there will be a few more insolvencies in 2012 that will reveal more.

OSCRE: Just for the geeks or time for the lawyers to get involved?

On 24 January 2012 I attended a symposium in London to discuss trying to push forward at a greater rate the implementation of the OSCRE standard and its adoption in the Real Estate community.  This is not a new path and many will remember the unsuccessful attempts at doing this no more than 10 years ago with PISCES.  In fact OSCRE is a sort of successor to PISCES.  It is the US version of PISCES and has now been adopted by the UK commercial real estate market following an amalagamation of the two standards boards.  So why does anyone think that OSCRE will succeed where PISCES disappeared into obscurity?
In my view the world is now significantly more advanced than it was 10 years ago making OSCRE a necessity.
1   What is OSCRE?
OSCRE stands for Open Standards Consortium for Real Estate but this does not describe what it is.  It is a universal language intended to allow real estate systems to "speak" to each other.  The ultimate goal is to enable the inputting of data only once and for that data then to be able to be re-used in different systems in the real estate world.

2   What happens currently?

Let's consider a simple property leasing transaction.  The steps are as follows:

a)  The agents agree heads of terms and send a hard copy to the relevant solicitor

b)  The solicitors draft the various documentation and following some negotiation it is finalised

c)  Both solicitors will produce word based reports to their clients setting out the final agreed terms and seeking execution

d)  The documents are executed and then completion occurs

e)  Various SDLT (tax) and Land Registry forms are prepared and sent to the relevant authorities

f)  Both solicitors will prepare a report for the asset management teams at landlord and tenant providing detailed information on the lease

g)  The asset manager will input the information received from the solicitors onto their systems

3   What could happen?

Taking the same transaction:

a)  The heads of terms are sent as data (a wordy version can be created as well)

b)  The initial draft lease is created automatically from that data and issued

c)  The documents are negotiated and agreed

d)  One solicitor updates the data reflecting the agreed terms and the other checks and approves it

e)  Both solicitors generate automatic signing request forms to their clients using the data and the matter completes

f)  The SDLT and Land Registry forms are gnerated automatically

g)  The information required by the asset manager is sent automatically

Is there a difference?

One simply needs to consider the above two lists to realise that the reference to "automatic" pervasive in the "What could happen?" scenario means two things:

1. Efficiency and thus cost savings
2. Reduced risk of data corruption

In a world where data and cost are key drivers it seems to me inevitable that the industry will be forced down the route of agreeing a standard form of "language".  It is incumbent on all professionals within the industry to work together so that we achieve that goal as quickly as possible and create the best possible language.  Lawyers are a lynch pin in this development.  We are the source of much of the base data.  If we do not actively participate in setting it up we will be left with the rest of the industry talking a "language" we do not understand.  I for one would rather help create the language than need an interpretor!