Mall operators hurting, but divided over rental waivers

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

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

But others 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, 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, chief executive, Virtuous Retail Property Services.

Prestige Group, which has waived rents till May, said long-term waiver is not possible. “We are not liable to waive rentals for 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 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.

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