The administrator of the Criterion restaurant in London's Piccadilly has revealed the details of the rent troubles that landed its owners with an unexpected £500,000 bill and forced them to call time on the business.
Vox Restaurant Ltd, the company owned by Georgian entrepreneurs Vasily, Irakly and Nino Sopromadze, brought in UHY Hacker Young in June this year and the restaurant was subsequently put up for sale. The business is estimated to owe nearly £5m to creditors.
It is still trading under the administrators, although a new buyer has yet to be found.
In a statement of Joint Administrators' Proposals filed at Companies House, UHY Hacker Young has set out details of the circumstances that led up to the restaurant's administration, at the heart of which was a sudden and unexpected 60% hike in the rent landlords were asking for the site.
Vox Restaurant started trading as the Criterion Restaurant in February 2009 when the company injected £1.2m into the business, which was used for a £525,000 rent deposit as part of a 25-year sub-lease of the restaurant, and a further £500,000 for refurbishment and operations.
The aim was for the business to realise 250 covers per day with a lunch, afternoon tea and dinner operation, with an average £50 spend per person.
However a combination of mixed reviews and the recession meant that the restaurant was quickly losing £20,000 a month.
Nonetheless the directors believed the business could still be turned around and injected a further £2m into it over a period of time up to August 2013, when they made changes to the operation of the company.
Despite that, trading revenue remained unchanged since 2009 until 2013, at around £3.5m gross turnover, and an annual net loss of £300,000-£400,000.
However after the operational changes, the business showed signs of turning a corner, with gross turnover in 2014 rising to £4.2m. Meanwhile the EBITDA loss fell to £130,000.
The forecast for 2015 was for a £5m turnover and an EBITDA profit of £200,000 (although the administrator stated in its report that "it should be noted that current turnover is not currently at the level that was forecasted").
However, on 5 November 2014 the landlord, Criterion Capital, triggered a rent review and demanded an increase of more than 100%, from £525,000 to £1.2m.
Neither party could agree on the figure so the Royal Institution of Chartered Surveyors (RICS) was called in to appoint an independent expert to resolve the situation.
In the end, the independent expert asked for both parties to submit their reports on how they believed the rent should be determined.
The landlord's report lifted its assessment even higher to £1.5m, while the Vox's report argued for no uplift from the current £525,000.
On 10 June this year it was decided that the rent would be £850,000, or a 60% increase from the previous rental of £525,000.
Since the official rent review date was February 2014, the rent was backdated until then, landing Vox with a £517,000 bill payable immediately, as well as new quarter uplifted rent due on 24 June of £255,000.
As a result, the directors decided that the shock bills meant it was no longer commercially viable to operate the restaurant and called in the administrators.
Unsecured creditors are estimated to be owed £4.9m. A large part of that figure is accounted for by loans from members of the Sopromadze family. Among other creditors are: the City of Westminster, which is owed over £211,000; Bookatable, which is due more than £11,000; HMRC, which is due nearly £38,000; and the Rare Breed Meat Company, which is owed nearly £16,000.
The Criterion, once owned by Marco Pierre White, was built in 1874 and was once known as either the Long Bar or Marble Hall. It is part of the 120,000 sq ft Criterion Theatre block, which is owned by the Crown Estate.
The Grade II-listed venue is famed for its neo-Byzantine golden mosaic ceiling.
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