Brands ask shopping centres to reduce rent till business gets back to normal

Brands and retailers have asked the malls to close the commercial agreements with reduced rents linked to the trading density of the malls.
A formula has been proposed in order to simplify the process and speed up the discussions, called as the Red-Orange-Green approach that will distribute the burden.
Red is the lockdown period in which the proposal is a complete waiver of rent and CAM (common area maintenance) charges and cancellation of invoices that have been raised.
Orange is the period post-lockdown when business is below normal. A variable model wherein the rent plus CAMs is based on the trading density of the mall, so if the entire mall is trading at 70 percent of LY levels then rent plus CAM for all tenants signatory to this letter, becomes 70 percent of LY levels.
Green is the period when business gets back to normal. As soon as the trading density of the entire mall sustainably touches 100 percent of LY levels, rent plus CAM terms will switch back to pre-COVID terms.
When contacted, the Retailers Association of India (RAI) said the retailers are having a direct dialogue with malls on the issue.
Queries sent to Aditya Birla Fashion and Retail and Arvind Lifestyle remained unanswered at the time of publication.
Retailers and malls are currently engaged on this issue and a mutually acceptable arrangement is yet to be reached. The brands seem to be petitioning the malls in their individual capacity but raising common issues on the applicable rent.
Retailers had written to the malls in the second week of April 2020 wherein relevant signatories of the said communication had appealed to for a complete waiver of rent and CAM for the period of COVID-19 led lockdown and for a reduced rent for a period of 9 months post the opening of the lockdown.
“All signatories have also independently and directly communicated the same appeal to you and explained the compelling circumstances and context related to the same,” as per the letter sent by the retailers.
“We regret to note however that we have still not been able to arrive at a mutually acceptable arrangement on the above. This despite the fact that retailers and their association have gone out of their way towards advocacy with govt agencies for a support package for malls. As a result of these efforts, we understand that you have received a moratorium of minimum 6 months on LRDs and also malls are expected to be allowed to open soon. We will continue to make these efforts with a win-win mindset,” the retailers added.
Retailers have pointed out that they will soon be confronted with the humongous tasks of re-opening malls and stores, bringing customers back and ensuring the safety of all involved during day-to-day operations.
Retailers and brands have to additionally deal with massive accumulation of inventories, unprecedented disruption in manufacturing and supply chain, and the huge shift of customers to e-commerce, amongst other things.
“We urge you once again to precipitate closure of commercial arrangements with the signatories of this letter so that we can have a timely and smooth opening of our operations in your mall,” they added.
“The Government of India, the Supreme Court and various authorities across the world have acknowledged that the Pandemic is a difficult time for all businesses and individuals. Governments have taken significant steps to provide relief to ensure viability of livelihood. We appeal to your sensibility to provide support to retailers and brands to overcome to impact of the pandemic and make retail trade viable for the future,” it said.