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Sinead Ryan: The truth about all those boarded-up city shops

It's a damn shame that the iconic Light House Cinema which adorned Middle Abbey Street for more than 20 years and Smithfield for two, may have to close. It's turning a profit, but a decision by its landlord to double the rent has resulted in a winding up petition.

Instead of encouraging it to remain open by reducing the rent, the landlord -- a property developer -- is demanding €200,000 a year, a 100pc increase, for an outlet which, if it simply doubled its ticket prices accordingly would cause customers to leave in droves.



DEPRESSING

The decision, although perfectly legal, was taken despite the worst recession in history, with no standing tenants and no prospect of re-letting such a specialised outlet.

It's not alone. The Total Fitness gym chain shut its doors last week after upward rent reviews caused it to go into liquidation. One hundred staff will be on the dole as a result.

Far less illustrious premises near me -- a dog grooming parlour and a local ethnic restaurant -- closed for similar reasons, joining the countless other vacant, boarded up, depressing shells of retail outlets which found themselves with no alternative after "upward only" rent reviews.

It can be hard to fathom what business decision can result in no rental income being preferable to some rental income. Yet these are choices being made every day by landlords. So, perhaps it's worth examining the process.

Where the owner of a retail outlet is a developer, he may be under immense pressure from his bank to pay off loans.

Doubling rent seems like a simple solution -- put the pressure on the tenant. After all, you can't sell the joint. Sometimes the tenant coughs up because he has no choice. Sometimes he moves, running the risk of losing a valuable customer base; sometimes he shuts up shop. It's a case of who blinks first.

In many cases the 'landlord' is a faceless pension fund. Run by trustees, these funds own vast tracts of property across the country. Did you ever wonder where the ILAC centre got its name? It's an acronym for Irish Life Assurance Company, which owns it, as it does the less disguised Irish Life Mall.

Hundreds of shopping centres, office blocks and retail outlets are owned by insurance companies being held as assets for clients who need to retire in 20 or 30 years' time.

Until then, it needs rent on the books. It "values" the assets by multiplying the projected rental income out over decades. Anything other than "upward only" posts a loss over time, which is unacceptable. Pension funds, by law, can only invest in very safe, very secure, performing assets. These are becoming increasingly rare.

Better to write off an asset on the books than have the future income stream decrease. After all, it will re-let in the future after a period of "adjustment". In the meantime, tenants close down and customers lack competition.



BONKERS

Commercial rents increased by 240pc between 2000 and 2007 -- eight times the rate of inflation. We are now in a prolonged period of deflation, and still they rise. But because so many properties were bought during the boom with massive loans, owners are caught in a bind.

It's bonkers, of course, and only serves to tighten up the market, leading to less competition. Finding a solution to fit everyone is challenging, but if the new landlord is, increasingly NAMA, then the State is obligated to get off its ass and find one. Otherwise a widening landscape of empty premises, open to vandalism and squatting presents itself.