There is still no respite for Mall Landlords as one of SA’s large cinema chains, Ster-Kinekor which occupies big pockets of space in many shopping centres, went into business rescue.
Lockdown has brought out simmering tensions between mall landlords and their big retail tenants. Is it over now? Not by a long shot.
The bruising is not over for South Africa’s landlords. In fact, analysts expect more severe pain is still on the way for the listed property sector as more retail tenants are buckling under pressure and some office leases would be up for renewal.
Ster-Kinekor, one of South Africa’s large cinema chains, announced in January the group would enter business rescue to safeguard the interests of the company, as customers stay away from movie theatres due to the Covid-19 pandemic.
It owns 60-65% of the market, having 55 movie complexes making up 400 screens and 64000 seats, with 154 of those screens being state-of-the-art 3D cinemas.
SA movie theatres and some gyms were paying only a fraction of the rent they owe months into the coronavirus crisis, delivering a blow to shopping centre owners’ hoping for a faster recovery.
Until February 2020, Ster-Kinekor “was profitable and highly cash generative, with good prospects of future, ongoing profitability,” the company said.
In a statement, Ster-Kinekor said its board of directors took the decision in an attempt to facilitate the rehabilitation of the company.
As a result of the Covid-19 pandemic and the lockdown instituted by government at the end of March 2020, all cinemas were required to shut down, and only permitted to reopen under strict conditions as from the end of August 2020.
“Since then the company has been operating under various forms of restriction, including curfews and mandatory limits to the number of guests per auditorium. In addition, there has been an impact of the rescheduling of blockbuster film contents from the original date,” the statement read.
It said the continued lack of content for the next four to five months meant that the business was heading for further operational and cash flow challenges.
“The board is of the view that the safe harbour that business rescue provides, in terms of providing a legal moratorium, will assist the business to return to profitability, once operating restrictions have been lifted, when international film distributions start to flow again.”
Ster-Kinekor acting CEO Motheo Matsau said: “For our customers, it is important to note that our cinemas remain open for business. Movie goers can continue to book their movie tickets through our website, app or in-store. All cinemas have instituted strict Covid-19 protocols, which mean temperature checks and hand sanitising on arrival and inside the auditoria and mask wearing as appropriate. Every two seats are kept vacant for social distancing.”
Stefan Smyth, a partner at EY SA, where he leads their Africa turnaround and restructuring strategy practice, was appointed as the business rescue practitioner.
Source: SA Commercial Property News http://www.sacommercialpropnews.co.za/property-companies-news/9319-worrying-moments-ahead-for-mall-owners-as-ster-kinekor-goes-into-business-rescue.html