Zara also mulls leaving Melisron malls

Zara photo: Eyal Izhar

Zara Israel is the Israeli franchise holder for Inditex, which accounts for 3.2% of Melisron's rental and management proceeds.

Sources inform "Globes" that the Zara Israel group, which holds a franchise for the Zara, Pull and Bear, Massimo Dutti, Stradivarius, Zara Home, and Gottex chains, is at loggerheads with Melisron Ltd. (TASE: MLSR), managed by Avi Levy, over renewal of leases and rent in Melisron's shopping malls. "Globes" reported yesterday that leading Israeli fashion and retail chains were threatening to abandon Melisron's malls because rents were too high. Melisron's share price is down 1% today and 10% since the beginning of the year.

Zara Israel, owned by the Gottex Brands company under the leadership of Joey Schwebel, is the local franchise holder of Inditex, an international fashion concern with 5,000 branches. It currently operates 87 fashion stores in shopping malls and centers in Israel through six different fashion chains, five of which have branches in Melisron's malls. Figures reported by Melisron show that Inditex accounts for 3.2% of the rental and management revenue generated by its malls (not of Melisron's total revenue). Melisron declined comment on the matter.

Melisron's 2017 financial statements show that its leading tenant is Fox-Wizel Ltd. (TASE: FOX), which accounted for nearly 7% of the rental and management revenue generated by Melisron, including 2% by Fox itself, 1% by American Eagle, and 1.5% by Laline and Mango, plus The Children's Place, Sack's Fashion, Yanga, and Foot Locker brands.

Melisron's second largest tenant, Hamashbir 365 Holdings Ltd. (TASE:MSAH), accounts for 5% of the rental and management revenue generated by Melisron, followed by Inditex. The fourth largest tenant is Golf & Co. (TASE:GOLF), which accounts for 3% of rental and management revenue, followed by Castro Model Ltd. (TASE: CAST) in fifth place with 2.4%. Trailing behind are the retail chains: Super-Pharm (2.1%) and Shufersal Ltd. (TASE:SAE) (2%). Still lower on the list of tenants are the Renuar group (1.8%) and H&M (1.4%).

Another interesting figure is the rent paid by the large fashion groups. Over the past three years, rents reported by the public fashion chains - Fox, Golf, and Castro - have risen. Part of this increase is attributable to the chains' expansion in recent years following the opening of more branches in shopping malls and other locations. For example, the Fox group paid NIS 332 million in rent and maintenance to shopping malls and commercial locations in 2017, NIS 31 million more than in 2016. Castro also reported an increase in rents, which totaled NIS 187 million in 2017, NIS 8 million more than in the preceding year. The only one of the three public chains that cut its rent was Golf as a result of a reduction in space.

As reported by "Globes," the largest groups are likely to not renew leases for their large stores even in leading and prestigious malls. This tension is attributable to a considerable number of chains, including Fox, which has 17 brands (mostly of which have independent chains); Castro, with seven brands having independent chains; Golf, with eight brands having independent chains; the Renuar group, with two brands having independent chains; Aroma Israel; and others.

There is always friction between the large chains and shopping mall groups, but this case is exceptional. in contrast to the other shopping mall groups, sources in the sector are saying that the Melisron group has not yet fully grasped how the market has changed. Threats are being made that unless a real turnaround takes place soon, the next step will be the closing down of stores on the group's sites. "Everyone is on the fence," leading market sources told "Globes." The sources also told "Globes" that the Renuar group (which also includes the 24/7 chain) is likely to leave its store in the Ramat Aviv Mall next month.

Schwebel said in response, "We don't negotiate in the media. We have only respect and appreciation for Liora Ofer and Avi Levy. They have excellent properties and we have a wonderful long-term relationship with them."

Published by Globes [online], Israel business news - www.globes-online.com - on July 25, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Zara photo: Eyal Izhar
Zara photo: Eyal Izhar
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