Sorry Edcon, we will not reduce Rent, says Growthpoint Properties

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Edcon's request for rental reduction was met with a major obstacle at SA's largest landlord, Growthpoint Properties. Edcon's request for rental reduction was met with a major obstacle at SA's largest landlord, Growthpoint Properties.

After securing R2.7 billion, Edcon's request for rental reduction was met with a major obstacle at SA's largest landlord, Growthpoint Properties.

The Unemployment Insurance Fund (UIF), debt holders and a number of landlords came to the rescue of the troubled Edcon group — which owns Edgars, Jet and CNA — in a deal that proponents say will avert a “jobs massacre” and swathes of mall space being shuttered.

Edcon chief executive Grant Pattison and his team achieved what many critics doubted they could — secure an almost R3-billion lifeline for a retail company that is deep in the doldrums.

But Growthpoint Properties said on Wednesday it had turned down Edcon’s request for a rental reduction.  Although the property company provided a cash injection of R110m in return for an equity stake, it said cutting its rent would not be in line with its strategy.

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“We are participating in the restructuring of Edcon, but this should have no material impact on rental income. We have reduced exposure to Edcon in recent years in our retail portfolio,” Group chief executive Norbert Sasse said. “This should decrease by a further 18000m² or more in the next two years.”

Growthpoint was among the landlords approached in December 2018 to consider a rental reduction for retail space leased to Edcon's brands.

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A number of landlords including Vukile Property Fund, Liberty Two Degrees and Hyprop Investments, met Edcon. They agreed to reduce rent in exchange for a stake in the business in a bid to stave off liquidation and save jobs. Edcon employs 40,000 people.

Redefine Properties contributed R54.6 million of equity agreed to rental reductions of as much as 13.8 million rand, the company said in a separate statement.

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Hyprop Investments which owns malls like Hyde Park Corner, Rosebank Mall and Canal Walk, has a strong interest in Edcon’s survival, given that the owner of Edgars, Jet and CNA occupied 66,781m² of space in Hyprop’s malls at the end of December, or 9.2% of its gross lettable area. 

Hyprop has been working with Edcon to reduce the retailer’s space requirements. The companies had agreed that 7,563m² would be vacated in the short term, Hyprop said on Friday.

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Liberty 2 Degrees (L2D), which is the Liberty Group’s listed property vehicle, has portfolio exposure to Edcon is 5.9% of the total gross lettable area of its portfolio. L2D co-owns Sandton City, Nelson Mandela Sqaure, Eastgate Shopping Centre and Melrose Arch.

In 2017, Liberty Two Degrees and Hyprop Investments emerged as the biggest losers from the closure of Stuttafords Stores. The 150-year-old department store officially closed its doors in 2017 amid tough economic challenges.

Read more on:

Retail Property Market  |  Listed Property / REITs  |  Growthpoint Properties  |  Redefine Properties  |  Hyprop Investments  |  Vukile Property Fund  |  Norbert Sasse  |  Liberty Two Degrees  |  Edcon Limited  |  Edgars Stores  |  Jet Stores