According to the Russian Council of shopping centers (RCSC), large shopping centers provide employment to 4 million Russians and pay taxes in the amount of 100 billion rubles a year. Closing of TTS because of the pandemic, put them in a position even more difficult than in the crises of 2008 and 2014.
According to the moderately optimistic scenario RCSC, by November-December the turnover of the shopping center will return to 70-80% devirusare period. The restoration of monthly proceeds to the level of 2019 will take 9 to 15 months after opening. In European countries, where they began to open stores, the average turnover of the resumed operation of the shopping center is now at 60% of pre-crisis, in South-East Asia – from 60% to 100% – it depends, in part, with any limitations allowed shoppers in the Mall, the number of open stores. Thus it is necessary to take into account the pent-up demand, a wave which will soon be held.
Even at the end of the quarantine by early summer, TTS is unlikely to provide traffic to paying customers at the level of 2019 in the next 2-3 years, says group Director of corporate ratings Agency NKR Alexander Diakov. Immediately after the lifting of the quarantine people will mechanically try to avoid places of a mass congestion, the number of visitors to cinemas, amusement parks, children’s play areas and food courts will fall sharply. In this scenario, the NKR expects the increase in the vacancy rate from 20% at the end of 2020 and reduced rental rates 15-20% while the increase in the number of contracts, where rents tied to percentage of sales. Inefficient facilities will have to restructure commercial real estate for other purposes – for example, in the co-working spaces or warehouses of the delivery goods the “last mile”.
the state Duma in the first reading adopted a bill that allows renters without penalties unilaterally break a lease if their income fell by more than 50%. Association of companies from the fields of catering, Wellness, beauty, etc. asked the government to quickly pass the bill. In particular, the fitness industry only 20-25% of the total number of landlords made concessions, says the President of the Association of operators of the fitness industry in Russia Olga Kiseleva. “Our players, especially the smaller clubs outside the big chains, completely defenseless. However, even the large chains are faced with the fact that landlords are not allowed in the premises, terminate contracts, and apply other methods of pressure,” she says.
the shopping center were strongly against the bill. The vast majority of cases, landlords have reduced the rent to 10-15% of pre-crisis or even canceled it, says Wojciechowski. The owners of the shopping center shall bear the costs of maintaining the buildings in working condition, payment of utility bills, salaries, taxes and loan servicing. Care tenants will exacerbate the problem. According to Wojciechowski, TTS is built for a specific pool of tenants, ordering the necessary specifications, trim options, which TTS sometimes invests up to 2.5 thousand euros per square meter. A change of tenants “reset” these costs. With a massive desire to move out the tenants, estimated to Wojciechowski, is not observed.
the Fall in income, which is exacerbated by the departure of tenants, will lead to negative consequences for banks, according to the RCSC. Shopping malls around the world are built on credit money, explains Wojciechowski, the debt load of the industry is estimated at 2.7 trillion rubles. Everything regarding the lease conditions, the SC negotiates with the Bank.
“the sub-sector shopping centres are faced with serious difficulties associated with a reduction of up to 85-90% of the cash flow from lease payments during the period of restrictive measures, – said the managing Director of the investment Department of the savings Bank James Corrigan. – Will need some time to see how the segment will get out of this situation. We have already seen a similar situation in 2014, when foreign currency loans were the predominant industry, and what happened the devaluation of the ruble led to another, but no less significant problem with servicing loans. When this did not observed a significant number of shopping centers, the ownership of which passed to the banks.”
Many banks have already provided vacation credit to the owners of the shopping center and began the restructuring of loans. The restructuring directly affects the profits of banks as they are forced to increase the size of the reserves, but the sale of collateral in the form of TTS can now turn to the Bank to even greater losses, says Diakov. So, RCSC believe that in the worst scenario, banks may obtain 2 trillion of defaulted debt, as well as 350 billion of direct interest losses.
“the scale of the whole banking sector, the depth of the problem is not as great as banks sought to diversify its corporate loan portfolio, – says the Manager of strategic marketing of PSB Andrey Barhota. – Downtime in the operation of shopping centers although it will exacerbate their financial condition, but will determine the resumption of their work and the loan can be restructured. In addition, banks have so-called capital buffers to buffer problems in this segment. Bank failures in this regard, precisely to be expected”.
After the crisis of 2014 in the shopping center began to actively increase the proportion of catering and entertainment. Now in the Mall will increase the share of social functions, such as educational institutions, spaces for master classes, individual studios for sports and creativity, the Director of Department of trading real estate Knight Frank Eugene Halberd��eve. May increase slightly the proportion of areas shopping centers employment centers, or multifunctional, for example, the departments of FIU, but a TC isn’t because of the location.
Immediately after the lifting of the quarantine people will mechanically try to avoid places of a mass congestion, so traffic is greatly reduced, especially shopping malls, where there are cinemas, amusement parks, children’s play areas and food courts, Diakov said. “Will leave Mall or greatly reduce the rented area of the company non-food retail sector, especially those involved in the higher segments of the economy in connection with the transfer of sales online, he predicts. – Enterprises of food retail as brands major brands of low and middle segment, will remain, but probably many will reconsider the terms of the lease”.
the Construction of new shopping centers will not stop, although it may slow down, says Akberdieva. Good prospects for regional malls and shopping areas as part of TPU. Obsolete shopping centers will be rebuilt into a multifunctional object. However, this trend of the past several years – about 15% of all shopping centers are already under update. The epidemic has only accelerated this process.
Boris Titov, authorized under the President of Russia for entrepreneurs ‘ rights protection:
the Glow around the bill to break leases has softened after the Ministry of economic development proposed, first, to limit the effect of incentives for tenants prior to October 1, 2020, and, second, to oblige the tenant for the breach of contract to indemnify the owners of the premises in the amount of one monthly payment. Softened, but not disappeared.
meanwhile, to resolve the conflict otherwise. Almost all the tenants in the shopping centers included in this list of the most affected sectors and can use these or other measures of state support. But the owners of the Mall all by herself. We need, in my opinion, the situation to align.
I have already appealed to the Minister of industry and trade Denis Manturov with a set of proposals in support of the industry. Among these measures is the inclusion of the shopping centers (NACE codes 68.20.2, 68.32.2) in the list of industries most affected by COVID-19, if they confirm the fall in revenue for the March-April more than 30% in comparison with January-February. Distribution of appropriate support to businesses of all sizes and shapes, not just small and medium enterprises. Release shopping centers at the time of a pandemic plus one quarter from the payment of property tax, land tax and land rents. The transfer of tax profit for the first quarter of 2020 at 12 months; VAT of 6 months.
given the fact that a large part of the Mall was built on borrowed money, the owners of shopping centers are burdened with credit obligations to banks. It would be possible to postpone the payment of principal of loans and interest thereon for the period of a pandemic, plus one quarter. In addition, to subsidize 1/3 of the rate for Federal funds and 1/3 by banks and 1/3 by the borrower by analogy with the mechanism for restructuring of credit debt of small and medium business in accordance with the government resolution of April 2, 2020 N 410.
From the fact that the SEC “will fall” like a house of cards, will not be good to anyone. It is necessary to compromise, and the state should not remain on the sidelines.
