Business survival is all about keeping lines of communication open and having a strong balance sheet
Ireland will experience a two-tier recovery from the pandemic — and estate agents can play a vital role.
That is the prediction of Michael McAteer, managing partner of chartered accountants Grant Thornton, which has 1,500 staff in seven locations.
Mr McAteer is one of the top corporate recovery and insolvency specialists in the country with extensive experience in the property sector. I asked him for his advice to business owners, landlords and agents.
Mr McAteer is positive about the prospects for most businesses, including those under particular pressure such as hospitality.
Pubs and hotels he believes will recover quickly as discretionary spending bounces back on reopening.
In the meantime he feels surviving will come down to the strength of company balance sheets and he stresses that good communication is key.
Taking the example of a pub, he says that the main outgoings are rent or mortgage payments and salaries.
With salaries broadly covered by the PUP, he believes that most landlords will write off a year’s rental arrears in order to maintain the pre-pandemic passing rent.
Banks are less likely to write off arrears — but typically may convert a 10-year loan into an 11-year loan.
The most important point, Michael McAteer says, is that businesses keep communicating with landlords, banks, staff and creditors.
People will understand their position because the outgoings are not unmanageable and everyone’s interest is aligned.
“But creditors get nervous if you stop returning phone calls,” he cautions.
In the slower second tier to recover are those businesses which will have to adapt, because of change accelerated by the pandemic — for example the increase in online shopping.
Where retail businesses are struggling, he again emphasises the importance of communication, but adds that restructuring can be more difficult in retailing where there is often a chain of shops and multiple landlords/creditors.
In these cases, Mr McAteer says agents can play a particularly important role. He gives the example of a chain of 30 shops — where 10 are viable, 10 unviable, and 10 more could survive.
Here, he says, the agent plays a crucial role in advising on the potential and convincing landlords to support the vulnerable but viable shops. The agent must also generate trust and transparency in the negotiations with the landlords, tenant, bank and the Revenue, he adds.
When appointing an estate agent, he says the insolvency practitioner must have absolute trust in the agent’s expertise in the particular sector.
He says there is an increasing focus on “bespoke knowledge” in many areas, for example data centres and pharma, where knowledge of licensing issues, construction and machinery adds “high value”.
He also noted that, coming out of the last recession, it became very clear where there were partly-built developments, that agents could maximise the value of the asset by advising a receiver to complete the building “rather than putting up a quick ‘For Sale’ sign.”
His advice to agents is to maintain strong working relationships with insolvency practitioners and not to over-promise on price when valuing a property.
“Don’t low-ball it either,” he says, “but manage expectations and make sure the communications are strong.”
Agents play another strong role in advising on the potential of property assets such as sites.
“Development sites and buildings in the right location are always viable — but recognising the ones in the wrong location, which will never work, is a fundamental,” Mr McAteer concluded.