Brazil's BR Malls to keep discounts even as leasing spreads slump
[SAO PAULO] Brazil's largest shopping mall operator BR Malls said it will continue offering discounts to retain tenants and shore up occupancy, which hit the lowest level in at least nine quarters amid Brazil's prolonged economic downturn.
Chief Financial Officer Frederico Villa said on a Wednesday conference call that the strategy would be in place through at least the fourth quarter, even if it meant a reduction of leasing spreads, which compare average old rent values with new values for contracts covering the same mall space.
The strategy of keeping discounts signaled management's expectations that occupancy levels will rise next year, when the economy could recover provided the central bank keeps cutting interest rates. "Our reason for doing that is to safeguard the company's sustainability in the long run," said Mr Villa, referring to the discounts. Occupancy rates in the malls the company operates hit 95.5 per cent last quarter, more than two percentage points below a peak level in the final quarter of 2014.
Rio de Janeiro-based BR Malls will keep renovating contracts and lowering rents at all malls, not only ones with higher vacancies, Mr Villa said, adding that discounts will be less frequent as the economy improves.
Leasing spreads slumped 21.3 per cent last quarter from the same period a year earlier, the company said on Monday in its earnings statement.
BR Malls, which operates or has stakes in 45 malls in Brazil, acknowledged net revenues were negatively affected by discounts in past quarters, but said the trend should continue until store owners "reestablish their financial health and rent delinquencies fall." Despite the challenging economic scenario, BR Malls posted 35.5 million reais (S$14.5 million) of net income last quarter, compared with a net loss of almost 220 million reais in the same period last year after significantly reducing general, administrative and financial expenses.
REUTERS
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Property
Forrest Li’s wife buys Gallop Road bungalow next to the one he has redeveloped
Chinese restaurants spur Hong Kong’s retail property recovery
Asking rents down as demand slows and rental listings surge
Eurozone consumers increasingly struggle to pay for housing
Too many property agents? Cap commissions on home sales
URA releases reserve list site in Zion Road after developer commits to bid at least S$604.6 million