Dark days ahead for Mall Landlords as Edcon battles with Rent

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Its rough ride for Landlords as one of SA’s oldest surviving retailers, Edcon Holdings which occupies big pockets of space in many shopping centres, is on the bring of collapse. Its rough ride for Landlords as one of SA’s oldest surviving retailers, Edcon Holdings which occupies big pockets of space in many shopping centres, is on the bring of collapse.

There is still no respite for Landlords as one of SA’s oldest surviving retailers, Edcon Holdings which occupies big pockets of space in many shopping centres, is asking mall owners to chop rent.

The debt-laden retail giant, which owns Edgars Stores, Jet and CNA, is asking South Africa’s big shopping Mall Owners to reduce its rent in order for it to survive. Without this concession, the company could be put into liquidation. 

The flagship brand, Edgars, operates as a major anchor, driving business to smaller retailers at many malls across the country. The retailer also accounts for 10% of occupancy in SA’s major shopping malls.

CEO Grant Pattison said on Monday that the group was negotiating new leases with its landlords as a way to cut costs.

"Edcon is very close to announcing a complete recapitalisation of the business that should endure for the next few years. We cannot comment on the details as it is not yet finalised. Speculation and sensationalism will harm, not help the company," Pattison said in a statement.

The company which operates 1,350 stores, is said to have asked for a 41% reduction in rent as its seeks to secure funding to stave off liquidation.

It offered a 5% stake in the business in exchange for a two-year agreement on rentals, citing a letter to landlords. This would help Edcon secure R1.9bn ($132m) in emergency funding from banks and the Public Investment Corp, it said.

It has debt of R7bn and has had to fight hard to maintain its relevance in a clothing retail market that has seen local and foreign rivals such as Mr Price, H&M, Zara and new online shops that are eating into their market share.

The closure would affect dividend payouts to shareholders for most listed property groups. 

Trading analyst Lester Davids said that landlords would likely find it difficult to fill the space currently occupied by Edcon stores around the country.

But Edcon going under would be even worse, he said.

The company’s woes are symptomatic of an entire sector under pressure as many retailers are struggling across the country.

The closure of the company would put 140,000 jobs at risk and deal a massive psychological blow to the South African economy. This would make it ‘by far the biggest single job loss ever’ in SA, said economist Mike Schussler.

The possible closure of Edcon would not only threaten the jobs of its employees, but could seriously threaten some of the country’s commercial property groups.

Meanwhile. the South African Federation of Trade Unions (Saftu) says the country cannot afford any more job losses. Saftu's Zwelinzima Vavi has urged Edcon to do all it can to ensure that workers' jobs are safe.

Mall owners 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 last year amid tough economic challenges.

Edcon is southern Africa’s largest non-food retailer. It has been in business for nearly 90 years and operate in stores across South Africa, Namibia, Botswana, Lesotho, Swaziland, Mozambique, Ghana, Zimbabwe and Zambia. 


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