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Mall operators hurting, but divided over rental waivers

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Builders and global private equity players with large portfolio of malls in India say it is not financially feasible for them to waive rentals for long as they have to meet their interest and other liabilities.

Large operators of malls such as Xander-backedVirtuous Retail, Select Group, Phoenix Group and Blackstone-backed Nexus have not waived rentals for their tenants.

But some operators such as Brigade Group and Prestige Group have offered a three-month moratorium on rents.

“With a large fixed expense base and financial commitments to lenders and government bodies, it won’t be possible to pass on much benefits if the government doesn’t give any rebate on loan payments and fixed expenses like property tax, electricity tariff, local taxes and other costs,” said Pankaj Renjhen, CEO at Virtuous Retail Property Services.

Prestige Group, which has waived rents till May, said long-term rental waiver is not possible. “We are not liable to waive off any rentals for the retailers for longer durations as there are financial obligations towards banks,” said Irfan Razack, MD at Prestige Group. “Financial institutions have only given three months moratorium (on loan repayments) and not waivers.”

According to mall operators, some domestic and international retailers are expecting deep discounting in their financial commitments, such as a reduced revenue share, besides rental waivers for up to a year.

“As of now, it looks like electricity charges and bank interest will be borne by the developers and no respite seems to be coming from the government or the retailers,” a senior executive with a PE fund said, requesting anonymity. “The banks seem to have deferred EMIs and not waived the same, adding to the pressure.”

But some developers said they would prefer to wait and see how the lockdown plays out.

“We are waiting to see how the government reacts, what kind of economic impact unfolds, and if there is a pick up in sales,” Arjun Sharma, chairman of Select Group, said in a webinar. The group has not yet taken a decision on rental waiver.

Malls across India have been shut since March 25 when the nationwide Covid-induced lockdown was first imposed. This has left many retailers stuck with old stock from the end-of-season sales in January.

Additionally, new inventory for the season that retailers usually order 60-90 days in advance is also causing a worry, given that there were no sales during the lockdown.

“Despite shutdown, mall operators have to service lease rent discounting (LRDs) loans and bank loans,” said Amitabh Taneja, chairman at Shopping Centres Association of India. “Mall operators will assess the damage post the malls are operational and work out a model that works for retailers and mall owners.”

Some mall operators want the government to increase the loan moratorium period to a year and defer electricity tariff and property tax.



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Written by sortiwa

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