Retailers, mall owners now willing to resolve differences over rentals

After a standoff of nearly two months, retailers and mall owners are now willing to resolve their differences with regard to rentals. This comes as the Unlock 1.0 phase is set to see a gradual reopening of various activities. 

Malls will reopen on June 8 in most parts of the country barring Mumbai, where the state government has decided against it for now. This is owing to the rising coronavirus (Covid-19) cases in the city. 

Given that there is a clear timeline regarding mall re-openings, developers and retailers have begun negotiations, multiple sources have told Business Standard. 

Mall owners, especially the larger players, appear open to the idea of giving some discount on fixed rent or the minimum guarantee amount that retailers have to pay as part of their current contractual obligations. 

They are willing to do this for about three months, persons privy to the discussions said, from the time malls reopen. This is to allow retailers stabilise their operations. 

“We have to find a middle path to this crisis,” said Rakesh Biyani, joint managing director (joint MD), Future Retail. “Both sides have seen enough pain in the last two months due to the lockdown. We now need to work together to make it safe and comfortable for consumers to get back into stores and malls,” he said. 

“We are talking with retailers. We are yet to conclude anything,” said Rajneesh Mahajan, chief executive officer (CEO), Inorbit Malls, which has properties in Mumbai and Navi Mumbai. 

While larger malls are not willing to consider modifications to rent pacts, smaller players are ready to look at these options, including providing revenue-share on rentals for a duration of three months. “What we have thought is that we will give a little more this year and take more when things pick up.

Post lockdown, we are open for revenue-share for some time,” said Bipin Gurnani, CEO, Prozon Malls. Prozon has properties in Coimbatore and Aurangabad. 

Some retailers have asked for revenue-share in rentals to the tune of 10-12 per cent for nine months starting March 2020, which has been turned down by most large mall owners. They argue that they have taken loans against their leased properties under the lease rental discounting scheme offered by banks. 

“Most retailers need time for their businesses to settle down before they can even think of paying rent. This is why we are asking for a variable model rather than a fixed-cost model on rentals,” said Lalit Agarwal, chairman and MD, V-Mart Retail. 

Revenue-share rent pacts mooted by retailers, may be difficult to implement, said Mukesh Kumar, CEO, Infiniti Mall. This is because current contracts don’t permit modifications. Infiniti has properties in Malad and Andheri in Mumbai. 

The Shopping Centres Association of India, a body of mall owners, expects around half of the 650 plus malls in the country to reopen on June 8. The rest, it said, will begin gradually as containment zones get de-contained and malls in these areas are allowed to restart operations.