Exclusivity clauses in shopping-mall leases to be reviewed

A call for the Competition Commission to address exclusivity clauses in shopping-mall leases that may be anticompetitive and restrain economic growth has been made by the South African Real Estate Investment Trust (Reit) Association.
Exclusivity clauses have been historically signed between landlords and the largest tenant shops to prevent direct competitors from opening stores at the same malls.

“The association is of the opinion that grocery retailers are using these clauses in their fight to restrict each other in market share,” the association said on Friday.

The Reit Association represents SA’s listed Reit sector and includes many owners of shopping centres.

It comprises all SA’s property companies which abide by certain tax rules and pay out at least 90% of their income to unitholders each year. The association’s members represent about R250bn worth of real estate assets.

It said shopping-centre owners are caught between contractual obligations with their supermarket tenants and providing a variety of grocery retailers to their customers “to the detriment” of SA’s consumers.

It considered exclusivity clauses undesirable and was “looking to the Competition Commission to intervene”. The association “confirms its members side with consumers on this issue and support upholding free market principles”.

OBC Chicken added its voice to the association’s complaint, saying it is often prevented from opening branches at certain malls. OBC sells chicken products predominantly in township areas and around train stations and taxi ranks.

“When positive negotiations with landlords are suddenly reneged on for no reason whatsoever, one becomes concerned,” said MD Tony da Fonseca.

The franchise group is concerned that malls opening in its traditional areas of business often practise “the blocking of sites by the anchor tenants who obviously have a greater say in the tenant mix of shopping centres,” said Mr da Fonseca. This is perpetrated by “many of the big players in the retail supermarket arena who have discovered the potential of trading in high-density black areas”, he said.

In 2009 the Competition Commission investigated the exclusivity clauses of lease agreements of shopping malls. It concluded the investigation two years later, without prosecuting any of the parties.

But it noted “that it’s the new landlord’s or acquiring party’s responsibility to use its best endeavour to negotiate with their supermarket tenants the removal of exclusivity clauses from their leases”.

The association said property owners had been unable to get the retailers to remove exclusivity clauses from the lease agreements.

SA’s third-biggest Reit, Hyprop Investments, said this week it had exclusivity clauses at some malls. Its major malls include Clearwater Mall, Hyde Park Corner, Woodlands and Canal Walk.

Article by: www.sacommercialpropnews.co.za/

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