Purpose

To review the lease terms.

Decision

Decision:

To agree to vary the terms of the existing lease to Stonegate Pub Company Limited over 2-3 Armour Buildings, Bridge Street, Guildford on the terms set out in Exempt Appendix 1.

Reason(s):

1. An agreement to the amended terms provides the Council with certainty of rental income to lease expiry in September 2030 and continuity of the repair liability as provided in the current lease which is to be transferred to the new lease. The benefits of such certainty outweigh the significant financial exposure and risk that an immediate surrender of the lease, or refusal to agree to the amended terms present.
2. As part of the Group’s ongoing restructure, Stonegate UK Midco Limited (a newly incorporated company) will be placed as the ultimate parent company and will act as guarantor for the leases. In that position, it sits at the top of the structure and has control of the wider Stonegate Group, including the operating businesses. From a landlord perspective, this offers a more secure group structure and introduces a UK based guarantor, which is more straightforward from an enforcement perspective and sits directly above the businesses responsible for the leases.

Other options considered and rejected by the Executive:

Option 2 – to accept an immediate surrender of the current lease in return for the payment of a sum to the Council equivalent to 6 months' rent. Such consensual agreement must be concluded by 24th June 2026.

Option 3 – to refuse the varied lease terms. In this situation, the tenant’s restructuring adviser has indicated that such leases will not transfer to the new group structure, will remain at risk and may be subject to a more formal restructure process. Landlords should not expect the tenant’s lease obligations to continue to be funded. It is not clear at this point what path this would take but it is likely that once the restructuring exercise has completed, the balance of any leases remaining in Stonegate Pub Company Ltd may be resolved either in CVA or restructure plan via court order. Officers are advised that the debt is substantial including a substantial private equity secured debt which would come before landlord’s debt.

Details of any conflict of interest declared by the Leader or lead councillors and any dispensation granted:

None.