Retailers, restaurant owners at loggerheads with mall owners, landlords over rentals amid coronavirus crisis – Business Today

Restaurant News

The coronavirus lockdown has brought businesses of retailers, restaurant owners, multiplexes as well as that of mall owners and other institutional landlords to a grinding halt. While the narrative of mall owners and the tenants has been one of collaboration and mutual support during this unusual crisis, there are murmurs of discontent. Several retailers and restaurant owners are unhappy for being billed by their landlords during the months of March and April when their revenue has been zero.

Riyaz Amlani, CEO, Impresario Entertainment & Hospitality (which owns restaurants such as Social and Smoke House Deli), says that the high street landlords have been far more empathetic than the mall owners and other institutional landlords. “While there are forward-looking malls which have waived off rentals and are saying that they would stand by their tenants, there are some who are using legal muscle.”

AD Singh, Founder and MD of Olive Group of Restaurants, says that his company has refused to pay rent for the months of March and April as well as the common area maintenance fee. “Some malls have put forward their case by saying that they also have pressures, we are negotiating with them. Many of them have also agreed for no rent.” The Olive Group runs 28 restaurants (Olive, Soda Bottle Openerwala, Toast and Tonic) across the country, and bulk of them are part of malls.

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Around 20-30 per cent of a restaurant’s cost is real estate costs. Rentals for a restaurant in a mall or even in a plush office complex can be anywhere between Rs 400-500 per square foot. “Apart from the legal aspects of Force Majeure, Impossibility of Performance and Frustration of Contract, landlords and tenants both need to act in good faith to find practical ways forward to ensure that jobs can be saved and the hardest hit hospitality industry can be revived over the next year or so,” says Rahul Keni, Operations Head, The Indus Club.

Mukesh Kumar, CEO, Infinity Mall, says that mall owners have little choice but to charge rentals to their tenants. “We ourselves are under tremendous revenue pressure. While we have billed our tenant for the months of March and April, we have reduced the common area maintenance fee by 50 per cent.” Kumar says that while negotiations with tenants are on, they will wait for the lockdown to get over and then take a decision.

A F&B industry tenant in the Blackstone-owned One BKC in Mumbai says, “Blackstone has taken the mystifying position that the pandemic and lockdown don’t constitute an event of force majeure and even more strangely they claim that One BKC is fully operational, but that’s not the case.” The tenant says that he has refused to pay rent for the months of March and April.

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Tenants across malls are working together to renegotiate rentals, says Alisha Malik, Vice-President, Metro Brands. “We are trying to arrive at a solution which will benefit both the parties.” Most malls have a combination of minimum guarantee rental model or revenue sharing deal, depending on which ever is higher. In fact, the likes of Infinity Mall work on a pure-play rental model. However, the future will see a higher percentage of revenue sharing deals, say tenants. “We are in the middle of discussion with lots of mall owners for revenue-sharing deals,” says Kamal Gianchandani, CEO, PVR Pictures and Chief Business Planning & Strategy, PVR.

The multiplex business is among the worst hit and is expected to be the last to bounce back post the lockdown. Almost 15-20 per cent of the area of a mall is allocated to a multiplex. The multiplexes contribute between 15-16 per cent of a mall’s revenue.

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