Saturday, August 08, 2020
Follow us on
BREAKING NEWS
नई दिल्लीः राष्ट्रीय स्वच्छता केंद्र का आज उद्घाटन करेंगे पीएम मोदीसुशांत सिंह राजपूत की मौत के मामले में आज सिद्धार्थ पिठानी से होगी पूछताछकेरल विमान हादसे पर अमिताभ बच्चन का ट्वीट, बताया भयानक हादसाकेरल विमान हादसाः कोझिकोड पहुंचे विदेश राज्यमंत्री, अधिकारियों के साथ की बैठकविमान हादसा: यात्रियों-परिवार के सदस्यों को सहायता के लिए दिल्ली-मुंबई से दो उड़ानों की व्यवस्थाकेरल विमान हादसा: 18 लोगों की मौत, उड्डयन मंत्री हरदीप सिंह पुरी जाएंगे कोझीकोडकेरल विमान हादसा: राज्यपाल, चीफ सेक्रेटरी के साथ CM पिनाराई विजयन जाएंगे करीपुर एयरपोर्टकेरल विमान हादसे में 11 लोगों की मौत
Haryana

Replace fixed rent with revenue sharing model: retailers to mall owners

July 15, 2020 07:11 AM

COURTESY MIRROR JULY 15

Replace fixed rent with revenue sharing model: retailers to mall owners
With no business since March, mall owners and their tenants have been discussing how to move forward once shopping centres reopen
| Vinay Dalvi and Satish Nandgaonkar
mirrorfeedback@timesgroup.com
TWEETS @MumbaiMirror

While BMC Commissioner Iqbal Chahal has ruled out reopening malls for now, mall owners and the retailers that rent space from them are engaged in discussions about how to negotiate these uncertain times, and what to do once malls finally reopen. With malls shut since the start of the lockdown in March, many retailers have been forced to shut shop, and those that remain are negotiating with mall owners for a rent cut. One of the ideas that has been mooted is retailers doing away with fixed rents and paying mall owners a percentage of their revenues until March 2021.

Few sectors have been hit harder by the coronavirus pandemic than retail - the Retailers Association of India (RAI) claims that five million people have lost their jobs and several retail shops are pulling out of malls and shutting shop temporarily or for good. Kumar Rajagopalan, CEO, Retailers Association of India (RAI), said, “Considering the nature of the virus, it will take time for things to return to normal. Mall owners need to develop a new model in which retailers pay some fixed portion of their revenue that month as rent.” RAI said for the industry to survive, banks also need to restructure the loans they have given malls so that they can pass on some rent discounts to store owners.


Sanjay Vakharia, CEO of Spykar Lifestyles, which has 23 retail stores in Mumbai and 280 across the country, claimed that 95 per cent of mall owners were ready to offer partial or full rent waivers for the lockdown period. However, he said, retailers were continuing to engage with them for a longer-term arrangement as customers were unlikely to come rushing back once malls reopened. “It is clear that consumers are not going to come to the malls in a hurry. In cities where malls have opened, footfall is low. Once we reopen, expenses will start but there won’t be enough revenues,” he said, adding that retailers want a variable revenue sharing arrangement until March 2021.

“We understand that malls have to service their bank loans and banks are not relenting beyond the six-month moratorium. But since we are in the same boat, we should support each other. We want fixed leases to be replaced with a revenuesharing model, in which the rent depends on the revenues coming in. We are ready to share 5 to 20 per cent of our revenues as rent. We need this support until March 2021,” Vakharia said. Manoj K Agarwal, chief executive of Viviana Mall in Thane, said they had received such requests from several retailers.

Similarly, Sachin Dhanawade, chief operating officer of Grauer & Weil India Limited, which has a mall in Kandivali, said, “If there is no revenue or rentals, mall developers will face a lot of pressure from the banks for their EMIs. Tenants are negotiating for different rental models, but it is imperative to evaluate the situation from both the ends.”

Mukesh Kumar, CEO of Infinity Malls, said that since the mall business is highly capital intensive, a large portion of revenues go towards servicing bank loans taken through the lease rental discounting mechanism. “For both developers and retailers it is a question of survival, not profitability. There is no cookie-cutter formula here. Mall owners are looking at offering part waivers, and some have offered up to 50 per cent waivers on rentals. Others are considering reducing the common area maintenance (CAM),” he said.

But, Kumar said, the real challenge will be getting customers back to malls. “Rent waivers are a short-term thing; the long term challenge is how to get customers back. Fortunately everyone understands that. The topline is very important. Even if we reach 40-50 per cent in the first couple of months after reopening, we will reach 80 per cent footfall in the next quarter and we should be okay. October to December is the time when retail does pretty well. I hope people start coming back.”

He said he expects a slow start when malls reopen. “Some retail businesses can open immediately. But some categories like food and beverages and entertainment may take longer. Both F&B and multiplexes are a big factor in driving footfalls in malls. In cities like Delhi and Bengaluru, where malls have reopened, footfalls are yet to touch 50 per cent of their normal level. While Delhi continues to be open, Bengaluru has gone back into lockdown,” he said.

Shubhranshu Pani, managing director, retail services, JLL, said, “Developers in the north and the south, where malls had reopened briefly, have given either a partial or full waiver on rent during the lockdown period. Some like DLF in NCR have given 25 to 50 per cent discounts on rent after reopening. The owners of Inorbit and Phoenix, which have a presence in other cities, have given waivers in those cities. So it is expected that they will do that in Mumbai too.

Have something to say? Post your comment