| SAO PAULO, Sept 30
SAO PAULO, Sept 30 Decisions by Brazilian
shopping mall operators to cut tenants' rents are limiting store
vacancies, sparing operators from the nation's harshest economic
recession in eight decades and helping fuel a 45 percent jump in
their shares this year.
Occupancy rates ranged between 93.8 percent and 98.1 percent
in the second quarter, better-than-expected, yet, in most cases,
slightly down from the first quarter, according to numbers
provided by some of Brazil's listed mall firms. Analysts expect
the numbers to remain around current levels, a sign of
By allowing tenants to pay less or parcel out rents for
longer, mall landlords are offsetting a two-year decline in
retail sales and declining household income, industry leaders
said. Despite recent signs of reviving consumer sentiment, a
recovery in retailing has a long way to go, they said.
"Albeit marginally, we have verified that vacancies have
gone down thanks to these renegotiation accords between malls
and store owners," said Luis Augusto Ildefonso da Silva, head of
institutional relations at Alshop, a mall industry group.
The modifications to leases are similar to steps taken by
banks, which raced to refinance hundreds of problematic loans
from some of their top corporate clients, avoiding a jump in
defaults and loan-loss provisions. Rent renegotiations,
alongside expectations of lower borrowings, have helped mall
stocks to outperform Brazil's benchmark Bovespa index.
Rent discounts, one of the few defensive tools at the
disposal of the $47 billion industry to withstand defaults and
vacancies, are likely to remain in effect this year and possibly
in early 2017, said Cristina Betts, chief financial officer at
Iguatemi Empresa de Shopping Centers SA.
Apart from negotiating with existing tenants, the lower
rents could attract retailers with little or no presence in
shopping malls, said Eduardo Prado, head of investor relations
at Aliansce Shopping Centers SA.
That could help malls improve their tenant mix, replacing
troubled tenants with those in a better situation, Prado said.
New operators are more likely to give rent discounts than
high-end or more established players, Iguatemi's Betts said.
Still, indicators continue to show mixed readings, making it
harder for investors to accurately predict the timing of a
Credit Suisse Securities analysts said a gauge of same-store
sales points to a recovery gaining traction in coming months,
with the indicator having already troughed in the prior quarter.
Yet, Iflux, an indicator gauging mall attendance, fell 2.5
percent in August over the same month a year earlier.
(Writing by Ana Mano; Editing by Guillermo Parra-Bernal and