Hatfield Galleria - negotiated settlement of rent review on T K Maxx within an outlet centre
Our Director Martin Black received an instruction from T K Maxx in relation to the rent review on their store extension in Hatfield Galleria Outlet Centre. The landlord's were contesting an increase in rent, wheras our advice to the client was that no increase should apply. Arising from the respective parties difference in opinion as to the quality of the property's location compared to other large store comparables in the same region, the matter proceeded towards arbitration.
- The basis of the review, as prescribed by the lease for the store extension, is to apply the higher of the 'Principal Rent', or 'Market Value'. The latter is arrived at by valuing the entire store as a whole, comprising circa 38,000 sq ft (including the extension), and then multiplying it by the pre-determined multiplier contained within the lease. The multiplier is equivalent to the proportion of the extension's gross internal area (GIA) compared to that of the store in it's entirety.
- We provided the client, T K Maxx, with pro-active advice in relation to the property's rental value, and made a pre-emptive approach to the landlord on the basis of a nil increase.
- In negotiations, the landlord's agent persisted in seeking an increase, based on comparables taken from large stores in superior town centre locations within the same region.
- Martin Black advised the client that an application should be made to the RICS for the appointment of an Arbitrator, and we then protected the client on the issue of costs by making a Calderbank offer at a nil increase. The landlord's agent subsequently issued a Calderbank offer based on an increase, which we recommended the client be rejected.
- Due to the specialist nature of the Hatfield Galleria Outlet Centre, where the vast majority of units are held on a turnover basis, and the subsequent lack of comparables in the vicinity, it was necessary to draw a wide range of comparables from other large stores suited to the discount-led sector of the retail market, across the same geographical region.
The matter proceeded towards arbitration, and our initial submission was compiled in accordance with the timetable set by the Arbitrator.
The landlord, just prior to the submissions being put in, conceded a nil increase which in turn facilitated direct discussions between our client and the landlord in relation to further extending their store.
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