The trustee-manager of Dasin Retail Trust CEDU has terminated its lease agreements with Guangzhou Jiaguang Supermarket (Carrefour China) for certain units in Ocean Metro Mall and Gome for certain units in Shiqi Metro Mall.
On April 25, the trustee-manager announced that Carrefour China had ceased operations at its units on five floors – from basement two to the third floor – of Ocean Metro Mall on March 1. Carrefour China had leased these units under the lease agreement on Nov 19, 2013. The agreement was entered into with Zhongshan Yuanxin Commercial Property Management as the lessor.
The Carrefour lease was for a term of 20 years commencing from Dec 28, 2014, and for a total leased area of 17,770 sqm (191,274.69 sq ft).
According to the trustee-manager, operations of Carrefour China, which is majority owned by Sunning.com, have not been as successful as it had expected from the commence of its lease as one of the anchor tenants of Ocean Metro Mall. Sunning.com is the seventh largest tenant of the trust.
The trust had discussed the early termination of the lease with Carrefour China in the first half of 2021 and Carrefour China has not paid the rent under the lease since the second half of 2021. The rent amounts to some RMB7.33 million ($1.4 million) as at March 31.
An in-principle agreement with Carrefour China was eventually reached in March, when the supermarket vacated the leased units. The terms of the termination of the lease are currently being finalised. Zhongshan Yuanxin is holding on to a security deposit of RMB2 million. Carrefour China is seeking a refund of the security deposit as well as reimbursement of renovation costs in the sum of RMB7.5 million.
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Following this, the trust says it is exploring asset enhancement initiatives (AEIs) for Ocean Metro Mall, with the targeted completion being 4QFY2023. The AEIs are said to be able to improve the mall’s rental performance.
The trustee-manager says it is considering a proposal from Carrefour China for the settlement of the rental arrears as well as Carrefour China’s claims. The early termination of the lease has affected the vacancy rate for the Ocean Metro Mall which, in turn, affected the valuation of the mall as at Dec 31, 2022.
Gome lease
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The trust is also in the process of terminating the lease agreement for Zhongshan GOME Electric Appliance (Gome) in relation to its units on the basement and first floor of Shiqi Metro Mall. The agreement was dated Sept 30, 2018 and entered into between Gome and Zhongshan Shiqi Dasin Xinduhui Commercial Management as lessor.
The Gome lease was for a term of up till April 15, 2027, for a total leased area of 4,373 sqm.
Gome, which is the sixth largest tenant of the trust, was said to have begun defaulting on its rental payments from March 2022. Between March 2022 and November 2022, 11 reminders notices were issued by Zhongshan Shiqi to Gome for payment, says the trustee-manager.
“On March 3, as the rental arrears and outstanding utilities payments remained unresolved, Zhongshan Shiqi ceased supplying power to Gome and locked the doors to the leased units. As of March 4, Gome has ceased operations at Shiqi Metro Mall,” reads the statement put out by the trust.
Gome still owes the trust rental arrears of some RMB8.4 million as at March 15, despite making “some payment”. Zhongshan Shiqi is holding on to a security deposit of RMB1.5 million and there are goods with an estimated value of RMB5 million remaining in the leased units.
Zhongshan Shiqi has commenced legal action against Gome for the rental arrears and outstanding utilities fees as well as to terminate the lease via legal action. Zhongshan Shiqi intends to lease out the relevant units after taking back the units through the aforesaid legal action, says the trustee-manager.
Earlier today, the Dasin Retail Trust’s trustee-manager announced that its preliminary independent valuations for its properties as at Dec 31, 2022, fell by 14% in RMB terms and 23% in Singapore dollar (SGD) terms, compared to the valuations as at June 30, 2022.
The trust also made an announcement about the litigation which its sponsor is involved in.
Units in Dasin Retail Trust closed 0.6 cent lower or 4.17% down at 13.8 cents on April 24.
