With malls closed, shopkeepers see retail collapse and ask for rent forgiveness

The determination to close shopping malls in São Paulo, Rio de Janeiro and Porto Alegre, and the reduced-hours operation in other cities, as a way to contain the spread of coronavirus throughout the country, aggravated the tension between shopkeepers and the owners of Ventures. The Brazilian Association of Satellite Retailers (Ablos) said it fears a "major collapse in retail trade, with losses that could break many companies," and said it will ask for a "moratorium" on rental, condominium and operating fees for rental debts. owners of the enterprises. The institution also wants the exemption of the next rents in the closed units and the collection of an amount equivalent to one percentage of the sales where the operation is partial, and not a fixed amount, as it is today. "It's time for those who have help those who don't," said Tito Bessa Júnior, president of Ablos and founder of the menswear network TNG. Bessa Júnior said the situation in the country is worse than imagined earlier in the week. The evaluation is similar to that of the Brazilian Association of Shopping Retailers (Alshop). "We are living in an extremely delicate situation. It's a war economy. The country's priority is to preserve health, but this clashes with the progress of the economy," said the institutional director, Luis Augusto Idelfonso. Alshop proposed to the owners of the networks to postpone the deadline for payment of the rent depending on the time that the activities remain suspended. "If the mall is closed for a month, the rent charge is delayed by a month as well," he said. In places where the operation will be partial, it also expects a rent proportional to sales, instead of paying for the full amount. "The mall administrators were asked to review our proposals. But if there is too much rigidity of them, the shopkeeper ends up closing the doors", he said. Ablos represents the smaller stores, including TNG, Barred's and M. Officer (clothing), Doctor Feet (services), Casa do Pão de Queijo (food) and SideWalk (footwear), while Alshop has associates of various sizes, including large retailers, such as Habib's, Pernambucanas, Riachuelo and Polishop. In all, about 55,000 shopkeepers in over 500 malls are represented by the two institutions. According to decrees published in recent days by the public authorities in São Paulo, the order is to keep the doors locked until the end of April. In Porto Alegre, it is 30 days, and in Rio, 15 days. If the pandemic worsens, other cities tend to follow the same path. The Brazilian Association of Shopping Centers (Abrasce), which includes the owners of the enterprises, was sought, but did not speak on the subject until the publication of this report. The entity has remained silent since decrees were issued ordering the enterprises to close their doors. Although they suffer from the situation, the owners of the networks will have a much smaller impact with the crisis than the shopkeepers. This is because most of the revenue from these groups comes from the rent charged to retailers for the space they occupy. There are also gains from parking, advertising and gloves (point marketing) and, more recently, e-commerce. In turn, the sales of retailers comes only from physical and online sales, although electronic channels are not a reality for all brands. Citi mall analyst André Mazini says the owners of the country's largest chains – BRMalls, Iguatemi, Multiplan and Aliansce Sonae – could lose around 7.4% of their annual revenues if all their units are closed for a month. "Our understanding is that, theoretically, companies could still rent full rents, even with a closed mall. However, we expect companies to value their long-term relationships with tenants and grant discounts for hours when malls are not open," Mazini said in a Citi report. He also said that mall owners have a resilient balance sheet, because indebtedness is low, and operating margin is greater than 70%, which gives greater capacity to face the shock in activities caused by the pandemic.