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SA’s biggest clothing retailers and landlords don't see eye to eye on paying rent under lockdown

Clothing and landlords are at odds over how much rent should be paid during lockdown.
Clothing and landlords are at odds over how much rent should be paid during lockdown.

SA’s biggest clothing retailers and landlords are no nearer to reaching an agreement on the amount of rent that should be paid during lockdown, with shopping centre owners on Friday rejecting a counter proposal that had been put on the table.

Retailers and landlords have been locked in discussions for weeks now over rent.

The Property Industry Group (PI Group), representing commercial property association Sapoa, the SA Council of Shopping Centres and SA REIT Association, earlier this month put together a relief package proposal valued at between R2bn and R3bn over a two-month period. The package’s relief measures include rental reductions and deferred payments for tenants, but exclude those able to continue trading during the lockdown.

However, SA’s major clothing retailers, TFG, Truworths, Mr Price Group, Woolworths and Pepkor then countered with their own proposal, which they said was more balanced and dealt equitably with the permanent losses incurred by tenants. This included the payment of all utilities consumed by retailers during the period, and 20% of normal rental, operating costs and recovery of assessment rates and taxes.

“Unfortunately their offer isn’t commercially feasible for our property owners, and the smaller the owner the less liquidity and more gearing they have. This makes it impossible for them to accept,” PI Group spokesperson Estienne De Klerk said on Friday.

“The big issue for us is that the clothing retailers do not want to pay 100% of their portion of the assessment rates, only 20%. We collect all the rates on behalf of municipalities. We are also apart on the discount. They want 80% discount and we can’t afford this as an industry.”

He said the PI Group had a “problem of principle” in discounting rates and taxes as it wasn’t the job of property owners to do this.

“If they want discounts on rates and taxes we must go to the municipalities and ask for the discounts. We are like a collection agent for municipalities in reality in terms of our contractual relationship.  

“Rentals have not gone up significantly, but in fact it’s really rates, and electricity and water that have gone up and in fact, in real terms, rentals haven’t gone up at all. Rates have escalated by 559% over the past 10 years as per MSCI (index), more than double inflation over the same 10-year period”.

De Klerk said the PI Group had told the retailers it was rejecting their offer and that discussions with them were “ongoing”.

“In terms of what the next step is — we still are having ongoing discussions with them. We have quite a good relationship with the retailers, believe it or not, considering how much money they owe us. We are also working together with them on proposals to open the shopping centres in a safe and responsible way.”

De Klerk said retailers and landlords were concerned about the way the relaxation of lockdown was proceeding.

“The way it’s going it seems it is a prolonged lockdown and it doesn’t help our industries at all. The detail of what can and can’t work [under level 4 lockdown] is still not clear to us. We are also working with government to try and see whether we can maybe improve on a couple of things. We are working to get the best answer for them, the retailers and the customers.”

The Retail Group, representing Woolworths, Pepkor, Truworths, TFG and Mr Price, was not immediately available for comment.

Meanwhile, The National Clothing Retail Federation of SA (NCRF) has written to trade and industry minister Ebrahim Patel appealing for clothing, textile, footwear and leather products retailers to be allowed to trade under Level 4 lockdown regulations.

“As retail CTFL [clothing, textile, footwear and leather] products are now in demand through extended lockdown; as winter items are necessary to purchase; as households which keep limited clothing for financial and space reasons increase demand for retail CTFL products, the NCRF appeals for functional opening of clothing retail to be a component feature of Level 4,” says the letter dated April 23.

The letter also refers to a joint submission by “clothing retailers and property landlords” on Monday on a “thorough and detailed action plan to protect staff and customers”. ​