Mall rentals: Negotiations stall

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The South African Property Industry Group (PI Group) and the Clothing Retailer Group (CRG), which have been in tough negotiations about shopping centre rentals through the Covid-19 crisis, have failed to reach agreement and have asked the government to mediate.

This was according to the PI Group, a collection of commercial real estate organisations co-ordinating a response to the pandemic for the sector. The PI Group also yesterday announced that it had increased and extended its assistance and relief guidelines for retail tenants. All stores barring essential food stores in shopping centres are closed through the lockdown. 

The negotiations between landlords and large retail tenants has seen landlords trying to convince tenants to still pay rent, while some tenants believed that they were within their rights not to pay rent and landlords argued that this was unlawful. 

The PI Group has the SA REIT Association, SA Property Owners Association and SA Council of Shopping Centres among its members. The Clothing Retailer Group represents The Foschini Group, Truworths, Mr Price Group, Woolworths and Pepkor.

“Our unique culture of ubuntu was palpable. Unfortunately, we can’t find a final meeting point on the level of rental discount, and the refusal by CR Group to pay their share of rates and taxes remains the major point of disagreement,” PI Group spokesperson Estienne de Klerk said yesterday.

“To preserve these relationships, and avoid a protracted process, we are proposing the government as a mediator to provide a mutually beneficial remedy,” he added.

Customer Experience Company chief executive Nathalie Schooling said the negotiations had been “heated” and the PI Group had finally launched a rental relief initiative where landlords would surrender at least R2billion in basic rent and operating costs.

“The client needs to be put first if property groups stand a chance of long-term survival. For too long, the tenant has been treated merely as a pay cheque, resulting in a master-servant relationship. In some cases, tenants can feel bullied by their landlords, having to adhere to non-negotiable requests,” said Schooling.

“My advice to landlords is to always listen to the concerns of their tenants, not only during times of crisis,” he added. “Post Covid-19, I suspect many businesses will rethink how they work, and potentially scale down their space. Retailers will also need to innovate, which again can mean rethinking leases and floor space, so it’s in the best interests of property companies to go the extra mile for tenants right now,” said Schooling.

The PI Group launched an initial guideline for assistance for retail tenants on April 7, and, in response to the extended lockdown, new guidelines were detailed yesterday, particularly for the small and medium-size retailers, said De Klerk.

The extent of assistance had been increased, more retailer categories had been introduced, additional options for some retailers had been provided and benefits were extended to three months from two months – April, May and June this year, he said. The property sector value chain includes more than 300000 jobs directly and indirectly through service providers such as security, cleaning and technical services, and building and construction. The sector is also the biggest contributor to municipal rates and taxes. Seventy-two percent of annual retail sales, or R789bn, take place at shopping centres.

The assistance guidelines offer relief for all affected retailers, regardless of size, but small and micro retailers could be given rental discounts of up to 100 percent for April, with further rental discounts and interest-free rental deferrals for May and June.

Large affected retailers with more than R1bn a year in turnover could get a 70 percent rental discount in April and pay the full rent in May, or they could opt for a 60 percent rent discount in April and a 50 percent rental deferment in May.

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