JSE-listed retail giants in rent negotiations

South Africa’s biggest JSE-listed clothing retailers and landlords are making headway in their negotiations. It seems both sides are making concessions around rental payments for April, which is virtually a write-off due to retailers not being able to trade during the Covid-19 lockdown.
At the weekend a newly-formed forum representing the country’s five biggest clothing retailers — Pepkor, TFG, Truworths, Mr Price and Woolworths — offered to collectively pay landlords around R220 million for April rent, which they say is equivalent to around 20 percent. This is in addition to utility costs for services such as water and electricity.
The move comes as most of these retailers, together with other players such as KFC and Dis-Chem, originally served landlords with letters stating that no rentals would be paid for April due to the government-imposed lockdown.
Known as simply as the “Retailer Group”, the forum of the big five clothing retailers said in a statement that it is now in discussions with the Property Industry Group (representing JSE-listed retail landlords) in a bid to find “a joint and mutually beneficial response to the significant challenges” brought on by the lockdown.
Last week Moneyweb reported that the Property Industry Group had come up with a package of rental relief measures for various types of landlords, from small businesses to major retailers.
The group is a joint initiative of the South African Real Estate Investment Trust Association, the South African Property Owners Association and the SA Council of Shopping Centres.
The package offered the most extensive relief to smaller players such as independent line shops and restaurants, while major retailers were offered a rental discount of 35 percent.
This week’s counter offer from the Retailer Group is likely to see even more intense negotiations with retail landlords.
“The adoption of an empathetic and constructive approach is vital to finding a workable solution benefiting all stakeholders,” the Retailer Group said in its statement.
“The retailers commend the government for instituting regulations to allow collective negotiations in the retail property sector in order to mitigate some of the negative economic impacts of the lockdown.”
The forum noted that it had “reviewed the scope of the relief package” offered to retail tenants by the Property Industry Group, however, it had now constructed its own counter proposals. The group said it believes that its proposals are “more balanced” as the offer deals “more equitably with the permanent loss faced by retail tenants” countrywide.
“The devastating economic effects of Covid-19 should be shared by both landlords and tenants … In constructing our proposals, and due to the divergent nature of our operations, we had to find a guideline that we all agreed on, to help shape the most appropriate response in these unprecedented circumstances,” the group added.
“Despite earning no revenue during lockdown, and in the interests of collaboration and reaching agreement with (the) Property Industry Group, (we) have provisionally put aside the opinions of (our) legal advisors during the negotiation, which state that rentals are not due during lockdown,” it pointed out.
­— Moneyweb