Lack of solvent tenants hits Wellington

The 829-strong Wellington Pub Company estate is seeing a shortage of "experienced and solvent tenants", management company Criterion Asset Management has stated.

Criterion also indicated that the amounts provisioned for bad debt have

substantially increased, as have some of the costs linked with recoveries of unpaid rent and repossessions.

The December 2008 re-sults revealed that gross rent collection via direct debit had declined to 57.4% compared to a historical average of 65% to 70%, a sign that more tenants are struggling.

The average rental uplift achieved on rent renewal was 9.8% in December 2008, down from 15.4% a year before. The last 12 month Ebitda, as of December 2008, excluding disposal profits, has declined by 4.6%.

For the 62 leases up for renewal in 2009, 24 have been confirmed at passing or higher rent, 23 are still pending, and approximately 20 will not be renewed and will be let on short-term tenancies and could be earmarked for disposal.

For the 23 leases still in discussion, the average rent discount considered is estimated at 11% by Criterion, although these are temporarily granted reductions.

Rating agency Fitch said last week that it had placed a Rating Watch Negative (RWN) on Wellington's fixed rate notes, reflecting the likelihood of a deterioration in the free-of-tie pub company's securitisation performance.