Companies Facing ‘$3trn Headache’ Due to New Property Lease Accounting Rules

Companies Facing ‘$3trn Headache’ Due to New Property Lease Accounting Rules

 

Changes to international accounting standards in relation to commercial property leases look set to leave businesses worldwide facing the prospect of adding $3 trillion to their collective balance sheets in the coming months and years.

That’s according to the estimates of the International Accounting Standards Board (IASB), which is the body responsible for bringing in the new rules, along with the Financial Accounting Standards Board (FASB) in the US.

And while the IASB is convinced that obliging companies to detail property leases on their balance sheets will improve transparency, some experts are convinced that the changes will present major headaches to hundreds of businesses worldwide.

“What we are looking at, now that the IASB and FASB have finalised their respective leasing standards, is nothing short of the perfect storm for corporate reporting,” said Richard Farr, managing director of Lincoln Pensions, told Financial Director.

“We have off-balance sheet leases being brought on-balance sheet through some very questionable and subjective decisions about what constitutes the value of the supposed ‘asset’, at the same time as companies are dealing with massive deficits in their defined benefit (DB) pension schemes,” he said.

“Moreover, all this is happening at a time when the global market is looking decidedly wobbly. This is likely to have an extremely negative impact on many companies’ relationship with their banks and with funders, and is very likely to have a severe impact on corporate credit ratings.”

According to Mr Farr, there is particular scope for companies from within the retail, hotel and airline sectors to be adversely impacted by the changes to international accounting standards.

At the heart of the matter for businesses in these fields is the shift from having property lease liabilities go from being off to on their corporate balance sheets, which might not initially be a major problem but could soon become just that in a situation where cash flow difficulties have emerged.

“You create a massive funding gap in the accounts which exacerbates the problems of any company that is starting to run into trouble,” Farr said. “The new treatment will make the balance sheet look far worse than it would have before the new standard came into effect.”

It is thought that some of the world’s largest retailers, whose off-book liabilities are worth billions of pounds, could soon see their financial positions made to look much less healthy as they are obliged to detail these liabilities on their balance sheets as a matter of course.

 

Written by: Steven Jones on Monday 16/05/2016

 

 

Supreme Court Ruling Set to Prompt Business Rates Rise

Supreme Court Ruling Set to Prompt Business Rates Rise

 

A ruling passed down by the Supreme Court in recent months is set to see business rates rise for numerous companies based across all parts of the UK.

The ruling relates to commercial properties and the issue of whether or not a company should have their occupancy situations assessed on an individual basis if they occupy more than one floor within a single building.

A unanimous judgement made last year has effectively settled the matter and decided that each floor being occupied by a company within a single building that is also used by other organisations ought to be assessed individually in relation to business rates.

The upshot of which looks set to be increased business rate liabilities for all manner of different office occupying enterprises around the country.

According to experts on the subject, some companies may also be frustrated to find that they can only make appeals to the relevant Valuation Office Agency (VOA) in cases that date back no further than April 1st 2015.

Until recently, it had been the case that appeals could be made to the VOA in relation to business rate decisions dating back to 2010.

The ruling given by the Supreme Court in July 2015 focussed on a specific situation in which an accountancy firm occupied the second and sixth floors of Tower Bridge House in London and was in dispute about whether its tenancy and its business rates should be officially considered as being one single or two separate arrangements.

For those passing judgement, the key issue was apparently whether or not the two floors of office space could be rented out separately and on an individual basis, as was eventually deemed to be the case.

Therefore it was subsequently decided that the tenancy of the two floors, although involving the same company, should be considered as separate tenancies and involve distinct business rate assessments on that basis.

As a result, discounted business rates in these kind of scenarios are now set to become a thing of the past for companies in all parts of the country.

 

Written on Thursday 12/05/2016

 

 

Designer clothes, shoes and jewellery up for auction in wake of Bath boutique collapse

Designer clothes, shoes and jewellery up for auction in wake of Bath boutique collapse

 

Niche fashion labels, including Japanese brand Antipast and cutting edge Turkish designer Umit Unal, will be among a large collection of exclusive designer clothing, worth more than £150,000, due to be sold by online auction after the collapse of a Bath-based boutique.

Other high-end brands that will feature in the auction, due to be held by Eddisons on 11 May, include Belgian premium label Bellerose, Kristensen du Nord, Private 0204, minimalist Italian marque Labo.art and British designer Robert Carey Williams. Most of the items up for sale are from this year’s spring-summer collections.

A range of shoes and accessories by designers including the iconic Italian footwear brand, Marsell will also appear in the auction, along with designer fragrances by the likes of Goti and Escentric Molecules. Jewellery by sculptural design house Parts of Four and pieces by Chan Luu will also be up for sale.

Kevin McAndrew, director of machinery and business assets at Eddisons, said: “It’s always sad to see a business brought down by financial problems. However the clothes, shoes and accessories that are due to go under the hammer represent a really eclectic – and very extensive – collection of high-end brands.

“Any fashionistas out there should stand a good chance of picking up a bargain or two with some strategic bidding – for many items the opening bids are set as low as £20.”

Viewings of all the items up for auction will be held on Saturday 7 May and Tuesday 10 May in Bath. Further information on the auction is available from Eddisons at https://eddisons.com/assets-for-sale/

 

Written by: Kevin McAndrew on Monday 09/05/2016

 

 

West Yorkshire water tower among lots at Eddisons property auction

West Yorkshire water tower among lots at Eddisons property auction

 

A disused water tower near Wakefield and a grade II listed former Victorian hotel building in Cleckheaton are among over 60 lots included in Eddisons’ next Leeds property auction, which are expected to generate in excess of £5 million.

The Leeds auction, which takes place at Elland Road Stadium on 21 April, includes a number of unusual lots, including the old Midgley Water Tower, at Flockton, near Wakefield, which is up for sale as a development opportunity with a guide price of just £4,000.

The George and Mead Hall in Cleckheaton town centre, which in the 19th century was an imposing hotel, has fallen into disrepair and has a guide price of £200,000-plus. The building covers almost 7,000 sq ft and has car parking and extensive landscaped grounds.

Glenn Levison, associate director at Eddisons , said: “We have a diverse array of properties and land going under the hammer in our spring auction which are generating plenty of interest. Property investment opportunities are in particularly high demand at the moment and the new stamp duty being levied on Buy to Let and second homes does not seemed to have diminished buyers’ appetites.”

He added: “Unusual properties always attract plenty of interest and the water tower at Flockton has already generated lots of enquiries. We are expecting it to go to an adventurous winning bidder, probably for rather more than its £4,000 guide price.”

Investment opportunities in the Leeds auction include a row of three Cleckheaton shops with two apartments above, at 28-36 Westgate. The shops are fully let to a recruitment agency, a tattooist and a beauty salon and the residential accommodation is also fully tenanted, generating a total rental income of £25,500 a year. The guide price is set at £275,000.

A two-storey, 4,000 sq ft building at 93-95 Main Street Garforth, Leeds, is also included. The premises is fully let to Barclays Bank on a five year lease until 2020, producing a rental income of £23,300, and with a guide price of £350,000 plus.

Monarch House on George Street in Wakefield city centre is a 9,000 sq ft landmark building suitable for division into two self-contained business units. It has a guide price of £260,000.

The auction will take place on 21 April at the Norman Hunter Suite, Leeds United Football Club, Elland Road, Leeds.

The full catalogue is available to view at https://eddisons.com/assets-for-sale/

 

Written by: Rob Limbert on Wednesday 20/04/2016

 

 

New home for former Drummonds Mill business

New home for former Drummonds Mill business

 

A Bradford-based online retailer whose business premises were destroyed in a devastating mill fire two months ago has relocated to Marrtree Business Park in the city.

Zoozio, which sells homewares, DIY supplies and gadgets to consumers from the  website, was forced to evacuate its Drummonds Mill offices on 28 January when a devastating fire swept through, and almost completely destroyed, the grade II listed former textile mill.

Now the company, which was launched in 2010 and has grown to employ ten people, has found a new home at the 44,000 sq ft Marrtree Business Park on Bradford’s Sticker Lane, where it is has taken the final available, 18,400 sq ft, unit on the site.

Eddisons Director John Padgett, who arranged the letting on behalf of landlord Frank Marshall Estates, said: “The Drummonds Mill fire was a devastating and very frightening incident for everyone involved and we’re really pleased to have been able to help Zoozio relocate relatively quickly to affordable, modern premises that are just a stone’s throw from the city centre.

“All ten units at Marrtree Business Park are now let, which is good news for Bradford’s economy: we are seeing demand for this sort of warehouse and industrial space outstripping supply right across the city as the economy picks up, thanks to the success of businesses like Zoozio.”

Edward Marshall, director at Frank Marshall Estates, said: “For Zoozio, and all the other businesses affected by the fire, it has been a very difficult time and as a Bradford business ourselves it’s very rewarding to be able to help provide them with suitable accommodation in a time of adversity.”

Marrtree Business Park is home to a variety of businesses including distribution and warehousing business Peckover Transport, light bulb manufacturer Crompton Lamps and European Packaging Distributors.

Walker Singleton is joint agent, with Eddisons, on the estate.

 

Written by: on Wednesday 20/04/2016

 

RICS Believe UK Rural Land Prices Will Fall Throughout 2016

RICS Believe UK Rural Land Prices Will Fall Throughout 2016

 

The Royal Institution of Chartered Surveyors (RICS) has reported that prices for rural land across the UK are likely to fall throughout the coming year, mainly due to a global decline in crop prices.

Across every sector of the farming industry, the demand for rural land is forecast to decrease over 2016. In the second six months of 2015, only the South East and North East regions saw an increase in the demand for land and it seems to be consistently downward trend.

Land yields did remain relatively static over the last six months of 2015, at 1.8% as opposed to 1.7% in the previous period, but arable and pasture land rents actually saw a drop in price of 4.5% and 4% over 2015.

The latest RICS report shows that 25% of all rural land sales are now to people outside the traditional agricultural community such as non-farmers looking to start up private cottage industries and this is an increase on the first half of 2015 where non-farmer sales were at 18%. South East England has the biggest percentage of non-farmer landowners at 32%. Perhaps surprisingly only 1% of all owners were found to be property developers which is a decrease of 2% on the second half of 2015 and sales to small and individual farmers fell too, by 5%, from 62% to 57%.

The report shows that rural land is becoming much more attractive for non-farmers and those outside traditional rural communities due to falling prices, whilst prices for both residential and commercial properties in cities and urban areas continue to rise. RICS expects the trend in non-farmer purchases of rural land and property to increase, with 25% already being bought by those outside the traditional rural community such as lifestyle buyers and hobby farmers.

RICS Chief Economist Simon Rubinsohn commented: “Start-up businesses do not have to be confined to the trendy streets of East London; Britain’s countryside has a great deal to offer young entrepreneurs. Market conditions appear to be encouraging a wave of new types of rural business, and help must be given to support this trend further if our countryside communities are to thrive.

“New entrants to farming businesses continue to face barriers, but at RICS we are currently working with the Fresh Start Land Enterprise Centre (FSLEC) who are developing a pilot matching service for potential land entrepreneurs, helping to bring together those looking for new opportunities in agriculture with those who have land and rural real estate to let.”

RICS expects the trend in non-farmer purchases of rural land and property to increase, with 25% already being bought by those outside the traditional rural community such as lifestyle buyers and hobby farmers.

 

Written by: John Padgett on Tuesday 01/03/2016

 

 

Government Data on Business Rates Labelled ‘Wildly Misleading’ by Chartered Surveyors

Government Data on Business Rates Labelled ‘Wildly Misleading’ by Chartered Surveyors

 

Data released by the government on business rates has been described as ‘misleading’ by chartered surveyors and rating experts.

The figures, published on 22nd February, suggest a forecasted £400m leap in rates revenues in the next year is indicative of a growth in new businesses. The claim was made by local government minister, Marcus Jones, who described the increase as being ‘due to the sheer volume of new businesses opening up around the UK’.

Jones’ statement has since been leapt upon by critics who highlighted a number of flaws in the data. Jones linked the rates payable next year to the 900,000 extra businesses in the UK compared to 2010 but critics argued the following points:

The fact that the majority of these new businesses are not operating from commercial premises and therefore do not pay business rates.

The fact that many of these new businesses are actually services such as ATM machine sites, telephone masts, Wi-Fi hubs, car parking spaces and similar.

Further criticism describes Jones’ claim as ‘fanciful’ and goes into detail as to exactly why these claims simply don’t stack up with one critic asserting:

“These figures make for good headlines for local government but are a kick in the teeth for hard pressed businesses looking for a cut in their costs and do not stand up to scrutiny. In reality there is absolutely no justification in claims that a further £400m has been raised through new business alone.”

Also scrutinised are the damning consequences of George Osborne’s policy to devolve business rates to local authorities. This flagship policy from the Chancellor will come into action in 2020 and will see councils retains all rates revenues growth whereas, currently, 50% of it is handed over to central government.

“The rates retention scheme which came into effect in 2013 and allowed councils to keep 50% growth was intended to encourage business friendly activity and promote local property development,” one critic commented.

“In practice local authorities have resorted to protecting their rates revenues by slashing the amount of rates relief they grant and have grown receipts through finding new things to rate. As we have seen from this latest set of data, authorities are unlikely to be able to rely on business growth alone and will look towards maximising revenue wherever they can.”

This flagship policy from the Chancellor will come into action in 2020 and will see councils retains all rates revenues growth whereas, currently, 50% of it is handed over to central government.

 

Written by: on Friday 26/02/2016

 

 

Ipswich bingo hall sold in £5.5m deal

Ipswich bingo hall sold in £5.5m deal

 

Property consultant Eddisons, along with joint agent Fenn Wright, has sold a 29,000 sq ft bingo hall in Ipswich for close to the asking price of £5.5m.

The detached property, on a 2-acre site on Ipswich’s Orwell Retail Park, is occupied by Gala Bingo and generates an annual rental income of £377,138.

Abdul Jambo, associate director at Eddisons, said: “Properties generating this scale of returns and with a good lease length are becoming increasingly rare in Ipswich.

“With nine years remaining on its lease and a healthy rental income of not far off £400,000 a year, the building was an excellent prospect and we are really pleased to have completed the deal for very close to the asking price.”

Eddisons has also been appointed to auction a number of other properties in Ipswich including a 78,000sq ft premises on Carr Street that is fully let to Poundland until 2023, and which generates a rental income of £250,000 a year. The property, which also has a basement and car park, offers long-term redevelopment potential and is expected to achieve in excess of £4.25m.

The auction takes place in Leeds on 25 February, with the full catalogue available to view here.

With nine years remaining on its lease and a healthy rental income of not far off £400,000 a year, the building was an excellent prospect and we are really pleased to have completed the deal for very close to the asking price.

 

Written by: Abdul Jambo on Wednesday 24/02/2016

 

 

Bradford vehicle build and repair business gears up with expansion into new site

Bradford vehicle build and repair business gears up with expansion into new site

 

Bradford-based West Yorkshire Truck Services (WYTS), a vehicle body building and repair business, has expanded into new industrial premises at GB Business Park on Cutler Heights Lane in Bradford due to a significant increase in demand for its services.

WYTS, which fabricates a range of bespoke bodies for vehicles from 3.5 tonnes up to 26 tonnes, including Luton vans, flatbed lorries and curtain sided HGVs, has experienced rapid growth over the last three years.

The company’s lease on the new 10,000 sq ft premises, will accommodate its growing need for space to carry out repairs, refurbishments and tail lift fitting and will create 12 new jobs. The new unit is in addition to WYTS’s existing premises at Enterprise Court on Prince Street, Bradford.

WYTS managing director, Kenny Axon, said: “The business has been rapidly growing over the past couple of years and it was becoming increasingly apparent that we were going to outgrow our site at Prince Street.

“We had been looking for the right premises, in a good location and offering the space we need, for some time. Now that we’ve found exactly the right place for us, that will enable us to grow, we can focus on driving the business forward.”

Property consultant Eddisons acted on behalf of WYTS, securing the premises for a rental return of £29,500 a year.

Alex Wilkinson, senior surveyor at Eddisons, said: “WYTS is a long standing client of Eddisons – we secured their Prince Street building for them three and a half years ago – and it’s good to see the business doing so well. Being able to work with them again and help them step up to the next level is particularly rewarding.”

GB Business Park is close to the M606 and is home to a number of high profile businesses including, steel stockholder Barrett Steel, Morrisons and builders’ supplier Wurth.

WYTS is a long standing client of Eddisons – we secured their Prince Street building for them three and a half years ago – and it’s good to see the business doing so well.

 

Written by: on Monday 22/02/2016

Brexit Could Cause Commercial Property Price Drop in City of London

Brexit Could Cause Commercial Property Price Drop in City of London

 

If the United Kingdom votes to leave the European Union it could result in a drop in commercial property values in the City of London, according to a new report commissioned by Woodford Investment Management and carried out by Capital Economics.

Capital Economics’ report suggests that an exit from the EU may have a negative impact on job creation and growth due to a potential 8%-15% fall, according to estimates. The report concedes that not enough is known at the moment to make a proper judgement and much depends on further negotiations.

The report highlights the biggest impact of an exit from the European Union would be on the City of London’s commercial property market. It states; “If Britain lost its free access to the single market, there is a worry that this could rapidly change the country’s status as a commercial gateway to the rest of Europe, with adverse consequences for both occupier and property investment markets” and further asserts that if overseas demand in the City did drop due to leaving the EU, the market will be severely impacted, especially when you take into account the fact that overseas buyers are responsible for around 50% of all commercial property transactions in Britain.

The report predicts a British exit from the EU as ‘likely to hit the health of the City’ and even states that is it possible that some overseas businesses may ‘close or scale back their London operations, putting a dent in occupier demand.’ It also highlighted that a drop in demand would come at ‘an unfortunate point in the development cycle’ and this could result in a vacancy rates spike and in rental values dropping, putting many property investors and business owners in a tricky situation.

Looking at the office space market, the report suggests investors may find themselves reassessing the City’s price premium which has grown steadily over the past two decades and more than doubled in this period – but with less demand this is something that may not continue.

If the City was to become less attractive and, as the report states itself ‘permanently damaged by the United Kingdom’s departure from the European Union’ in the eyes of potential investors, then a jump of between 50 and 100 basis points in City office yields would not seem implausible and this would equate to 8-15% of capital values.

This is one report looking into how Britain’s exit from the EU could impact the City of London and there are sure to be many more to provide business owners and property investors with a broad understanding before it is time to vote.

Looking at the office space market, the report suggests investors may find themselves reassessing the City’s price premium which has grown steadily over the past two decades and more than doubled in this period.

 

Written by: Abdul Jambo on Monday 29/02/2016