With revenues dented, and recovery expected to be slow, mall operators have started renegotiating their contracts with mall owners – for waivers in lease payments, or discounts over the period of lockdown and in the medium term – thereby impacting mall revenues.
These operators expect a 50-100 per cent lease waiver for the period of lockdown, followed by a 30-50 per cent concession in rentals in the current quarter and the next, which will reduce to 0-20 per cent in the quarter to March, said Sachin Gupta, Senior Director, Crisil Ratings.
These malls have total rated debt of Rs 4,200 crore and cover 7.5 million square feet (msf), with pan-India presence. These have strong sponsors and high debt service coverage ratio (DSCR) of 1.5 times on average. Mall owners may need to give deep concessions to keep their tenant profile intact and may even need to shift to a 100 per cent revenue sharing model. The current revenue stream includes a minimum guaranteed rental along with a portion from revenue share.
Revenue of mall operators is set to halve this fiscal because of the COVID-19 pandemic-driven lockdowns, an analysis by Crisil of the top 10 malls it rates indicates. Much of the impact on mall revenue is because multiplexes, food courts, restaurants and gaming zones have not yet opened in many locations as per government orders.
For the other categories, such as apparels, cosmetics, electronics, and bookstores, which contribute 75 per cent of mall revenues, consumption is still low at 30-35 per cent of previous years’ numbers in the first month of operations post re- opening.