Focus seeks new rent deal in bid to survive

The DIY chain chairman is visiting all its landlords to ask them not to demand quarterly payments

Focus, the DIY chain, is negotiating with its landlords for an extension of rent payments in order to survive.

The group, which has 178 stores and employs 3,700 people around the country, wants to continue to pay rent on a monthly basis rather than for three months at a time. Focus has been struggling for several years but a recent sharp downturn in trading has deepened the crisis.

Bill Grimsey, the Focus chairman, is visiting more than 100 landlords to ask for an extension to an agreement that was put in place in August 2009 as part of its company voluntary arrangement (CVA) which also saw the closure of 38 stores. The agreement, which was for monthly rent, is due to end in March.

Private equity group Cerberus, which owns Focus, hired Lazards to advise on the future of the business at the end of last year.Harvey Spack Field is advising on rent negotiations.

Mr Grimsey said talks with landlords have been positive so far and he is hopeful of reaching agreements with most of them to extend the monthly payments for at least the rest of this year.

"We are having to grapple with the difficult conditions we currently face and we are asking our stakeholders – our landlords to help with this," he said on Friday. He pointed to the recent announcements by rivals B&Q and Homebase which both highlighted that 2011 is predicted to be a tough year for DIY and the retail sector as a whole.

The news comes as the poor Christmas sales took their toll on two retailers this month.

Young fashion chain Krisp, which has 32 shops in the UK, has been placed in administration and, on Friday, HPJ Jewellers, with around 70 stores, also filed for administration.

The jewellery chain was bought by restructuring specialist Gordon Brothers in December and KPMG has now been hired as administrator. It is proposing a "rescue plan" that would see it shrink to around 35 shops.

The administrations of Krisp and HPJ follows British Bookshops & Stationers – the first retailer to file for administration in 2011.

Tim Leatham, the director of shopping-centre management at Savills, which collects rental payments from retailers, said: "The next three months will be crucial for retailers. They will face rising inflation and unemployment, public sector spending cuts, the VAT rise and potential interest rate rises. And they will soon be faced with the March rent quarter day.

"Valentines day will be an important time for retailers and with a longer gap until Easter, we can expect continued caution with some retailers considering rationalisation options in order to focus on their stronger performing stores."

This week, Deloitte estimated that around £750m of retail spend was lost as a result of the snow in the weeks up to Christmas.

Catherine Lambert, a retail expert at the commercial property adviser Jones Lang LaSalle, said: "Although some research has suggested that vacancy levels at shopping centres have fallen recently the actual number of retailers that have declared intentions of closures means there is still a huge cause for concern.

"Unless you are a destination shopping centre or a convenience centre, where demand is still holding up, there are plenty of problems on the horizon."