Thursday, July 16, 2009

Retail Initiative For Tenants

Source : The Straits Times, July 14, 2009

MAJOR landlord Far East Organisation has come up with a novel way to help tenants defer rent for up to three years.

Far East Organisation launches first Rental Space for Equity Programme to bolster exciting new retail brands and concepts. --PHOTO: FAR EAST ORGANISATION

Here's how it works: Tenants register online and go through an evaluation process before being selected. Those chosen will 'sell' company shares, which are based on their monthly base rent, to Far East Organisation each month.

Sales are capped at 49 per cent of their paid up capital, or $500,000, whichever is lower.

The catch? They buy back the shares they have sold - not more than three years later - at an interest rate of 4 per cent.

Alternatively, if both parties agree, co-ownership can occur.

Far East is the first mall owner to offer such a scheme. Other mall operators, like Orchard Turn Developments and Asia Malls, have resorted to rental rebates and waivers to help tenants open on time.

The scheme, said Far East Organisation, aims to attract budding designers who want a headstart, international retailers with new concepts and existing retailers who want to expand.

Only 5 per cent of rental space in six of its malls - namely Central, Far East Square, Orchard Central, Pacific Plaza, Square 2 and West Coast Plaza - will be allocated to this scheme.

This comes up to 45,000 sq ft. Depending on the size of each lot, this is expected to cater to about 90 tenants.

It is a support programme, said Far East Organisation's executive director of investment properties Eddie Yong. 'Running a business is like a marathon,' he said. 'We are just providing a helping hand to get them off the starting block or encourage them to start the race, by easing cash flow constraints.'

He stressed: 'It is not our intention to own or run our tenant's business.'

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