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Davos has become a schmooze-fest for sponsors and celebrities | Davos


It would be wrong to say the Davos organisers completely missed the threat of a global pandemic. At the World Economic Forum’s event in January 2019 attendees could have read a 20-page report, in collaboration with the Harvard Global Health Institute, that now reads excellently.

It concluded: “Although rarely emphasised in businesses’ risk considerations, recent work on pandemics quantifies how massive the potential economic losses from infectious disease outbreaks can be and how they can extend far beyond the original outbreak’s footprint”.

Very good, but did any of the corporate chiefs at Davos that year do anything in response? One suspects 99% didn’t read the document. Davos, for all the worthy studies that may happen behind the scenes, has primarily become a schmooze-fest.

It is a networking and sponsorship event in which politicians and business leaders move from think-ins on global inequality to champagne receptions (on other people’s tabs, naturally) without skipping a beat. Even the “business leaders” description is too generous: the financial services industry, and its interests, is vastly over-represented.

Coronavirus has forced the cancellation of next January’s event but, rather than rethinking its entire approach, the WEF seems determined to get the same show on the road as soon as possible. They’ll do it in the summer instead.

A period of reflection would be better. A plush ski resort is entirely the wrong place for this event. And, to maintain any credibility, the WEF has to stop counting success in terms of how many sponsors and celebrities it can attract. As the prescient pandemic report showed, the WEF is capable of highlighting risks that escape day-to-day attention. Concentrate on that stuff. Use this opportunity to ditch the circus.

New Look’s proposal could have landlords huffing and puffing

Rents are falling fast in retail-land but here’s a proposal that suggests the bottom remains a long way off. New Look would like to rip up its conventional fixed-term leases on 402 stores and move to turnover-based rents instead.

The landlords would get between 2% and 12% of a store’s revenue for three years, which, at the bottom end of the range, ain’t much. The effect would be a hefty cut in New Look’s rental bill. For its other 68 stores, the chain would prefer to pay no rent at all, thanks very much.

If New Look’s offer-cum-demand, which is as aggressive as any from a retailer of its size, sounds like one landlords would refuse instantly, think again. The company stands a fair chance of winning the 75% approval it needs from creditors.

That is because New Look isn’t merely gambling that its landlords don’t have better options; it’s run the numbers. The turnover ratios have been calculated, on a store-by-store basis, to reflect rents that a new tenant might be able to negotiate in today’s battered market.

Thus New Look doesn’t fear being kicked out of many premises and is happy to give landlords greater powers to try their luck. The logic even applies with the proposed zero-rent premises: the landlord would risk having to pay business rates on an empty shop.

From the point of view of the landlords, it will feel terribly unfair. New Look signed its leases willingly and half its problems stem from the excess debt that it has been carrying since 2005, a legacy of private equity ownership. On the borrowing front, New Look’s bondholders are formally writing off £440m, but that’s little consolation for the property owners.

The landlords will huff and puff and may yet extract a few concessions. Ultimately, though, one doubts they’ll tip New Look into administration, threatening 11,000 jobs. The new reality is that flexible turnover-based rents can be a useful compromise in a crisis.

What the landlords should really fear is the calls for lower rents from stronger retailers than New Look. Those demands are arriving already, and more will follow. The retail property market is only moving in one direction.

Carney’s venture into responsible investing is a surprise

Mark Carney’s first post-Bank of England move is a surprise. The former governor is joining asset manager Brookfield to launch an “impact investing” fund. What’s Brookfield? Well, the Toronto-based firm has its roots in property but these days its empire spans $550bn of assets of various types.

Socially-aware investing, however, is a relatively new adventure for Brookfield. It has some renewable energy assets, but one can think of more obvious places for Carney to pursue his interest in responsible investing, “one of the greatest financial opportunities of our lifetime,” as he puts it. One hopes he is there to do more than sprinkle a little marketing stardust.



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