Headlines across Europe and the UK are centered around coronavirus news and Brexit negotiations, both of which have an impact on the commercial real estate (CRE) industry. Although the UK left the EU in January of this year, negotiations continued throughout the pandemic, and only have until December 31st to be finalized.
If there is a no-deal Brexit, the BBC highlights there will be border checks and taxes introduced for goods traveling between the UK and the EU which will have a huge impact on the retail, and industrial CRE industries. Deal or no deal, changes will still be seen and we will be monitoring these changes and how they could impact CRE.
In other news, we have seen major retailer Marks & Spencer announce that it will put efforts into ESG responsibilities. Supermarket chains and delivery services also made headlines this week as they prepare for spikes in online shopping during the holiday season.
Marks & Spencer ESG Announcement
Marks & Spencer (M&S), a leading British retailer in food, clothing, and homeware, with more than 1,400 stores across 57 countries, announced plans to relaunch a version of its sustainability program and to create an ESG board subcommittee, according to MarketWatch. The subcommittee will reportedly be effective from Wednesday of this week and will “seek to provide focus and oversight of the program across the business.” M&S announced the team’s first task will be to create a timetable for the relaunch of their sustainability program, which was originally launched in 2007, but Chairman Archie Norman said: “the time has come to look again at our plans and challenge our thinking.”
The Trepp team has discussed the importance of ESG frequently on TreppTalk, most recently in the UK with the creation of Asda’s first sustainable grocery store in Leeds, England. With M&S following suit in the creation of their ESG board and the promise of a sustainability program, we will no doubt see retailers follow suit. For more information on the importance of ESG for CRE, click here.
Success for Online Grocery Shopping
Marks & Spencer made headlines more than once in the past week, this time through Ocado. Ocado, known for its food delivery service has been delivering for M&S since September, and last week announced it raised its full-year profit forecast for the third time this year, according to the Financial Times.
The company announced its supermarket arm, Ocado Retail, which includes Marks & Spencer, sales have increased by 35% in the final quarter of its financial year. Numerically, this means in the 13 weeks to November, their sales have reached almost £580 million. Ocado said that not only has the pandemic increased consumer demand for online shopping, but it has meant that demand for delivery slots has been spreading out across the week with people working from home, availability extends to weekdays as well as weekends.
Sainsbury’s also announced that it will double the number of seasonal workers it employs during this winter since it is anticipating three-quarters of a million online orders every week. Much like Ocado, Sainsbury’s witnessed a rise in online orders and doubled its capacity, expecting to see around 750,000 online orders every week in December, through door delivery or click and collect.
This news comes ahead of the holiday season, and with coronavirus restrictions in place across Europe, many are opting to grocery shop online, contributing to the success of companies like Ocado and therefore Marks & Spencer and Sainsbury’s. The news of online retailers seeing such success has, as we have discussed many times both on TreppTalk and on The TreppWire Podcast, meant that in-person retail chains have been racing to build up their ability to offer home deliveries and click and collect services.
UK Pubs Concerned for Future
The Guardian reported early this week that pubs in the UK expect their sales to be as much as 90% lower than last year, which means the industry could lose up to £650 million. Usually, pubs can earn up to a quarter of their annual profit due to holiday parties and festivities. News of London’s move to Tier 3 this week will only exacerbate this problem since according to Chris Jowsey, CEO of Admiral Taverns, who has 1,000 pubs across the UK, the two weeks before Christmas are critical to pubs’ success.
As lockdown restrictions are reviewed and updated across the UK, we will continue to monitor the effects on pubs and restaurants, and other hospitality businesses.
Creditflux recently reported that CIFC Asset Management priced the tightest European CLO with four years of reinvestment post-COVID. The €368.8 million deal, named CIFC European Funding CLO III, was issued by Barclay’s. This is CIFC’s third European CLO and they will reportedly hold a vertical risk retention interest in the CLO via the originator route. They are the first manager to price a deal amid the current crisis.
CMBS Surveillance: Recent European Special Notices
Deal Name: TAURS 2006-2 Loan Name: Mapeley STEPS
Special Notice: Servicer has received a Notice of Prepayment from Mapeley STEPS Limited stating their intention to repay the loan on 16/Dec/2020; Servicer will provide further updates in due course.
Deal Name: ELIZABETH FINANCE 2018
Special Notice: EFS has replaced Elavon Financial Services DAC, UK Branch (“EFSUK”) via a deed of resignation and appointment as the service provider for Issuer Account Bank, Principal Paying Agent and Agent Bank with effect from 10/Dec/2020; In addition, the Issuer has appointed U.S Bank Global Corporate Trust Limited as additional paying agent in relation to the Class X Certificates effective 10/Dec/2020; Issuer will grant a first-ranking security interest over certain of the Transferred Accounts held by EFS to Issuer Security Trustee for and on behalf of the Issuer Secured Creditors.
Deal Name: DECO 2006-C3X
Special Notice: Republished notice of the notice dated 3/Dec/2020. The Issuer has corrected the description of the Class A-1B Notes referred to in the Previous Notice and also included reference to ISINs in this notice.
Deal Name: INTULN
Special Notice: On 7/Dec/2020 an Obliger Event of Default, Default and Trigger Event occurred when Borrower did not make a transfer of Cash Pay Interest due on business day prior to 6/Dec/2020 IPD; Issuer understands that Borrower is currently in constructive negotiations with advisors to an informal ad hoc committee of certain Noteholders with view to, inter alia, obtaining forbearance wrt Obligor Event of Default, Default and Trigger Event referenced.
- Hayley Collier
Compliments of Trepp – a member of the EACCNY.