JOINT liquidators of CL Financial, David Holukoff, and Hugh Dickson, have started a process to sell Trincity Mall and Long Circular Mall, two of the last retail spaces owned by CL Financial subsidiary Home Construction Ltd, multiple sources told the Express Business.
The joint liquidators have procured a valuation for the properties, hired a manager for the process and issued a Request for Proposals to some of the country’s top commercial property landowners.
Together, the two malls comprise about 650,000 square feet of retail space and house about 400 stores, inclusive of kiosks.
Before the onset of the Covid-19 pandemic lockdown in March, the occupancy rate at Long Circular Mall was between 75 and 85 per cent, while Trincity Mall was between 80 and 90 per cent.
But the occupancy levels at both malls have declined substantially as a result of the lockdown in April and May and the current health restrictions aimed at stopping gatherings of more than five people
One Trincity Mall tenant told Express Business that there are a handful of businesses there that are surviving, including Tru-Value, Pennywise, and the pharmacies in the mall.
But the traffic of potential shoppers through Trincity Mall has slowed to a trickle since March.
Another tenant, who insisted on anonymity, outlined three reasons why the number of people coming to the Trincity Mall has declined.
“The cinemas have been closed down; the restaurants at the two food courts are now only allowed to sell food on a grab-and-go basis and Royal Bank has closed its branch at the mall as has Island Finance,” said the tenant.
“We are on borrowed time, unless we can get the mall management to throw out a survival line for the tenants to hold on to, or until we can see a change in the economy,” said Valentino Singh, the owner of Trincity Malls Fan Club, a store that sells football memorabilia for all of the top teams in the world.
The Trincity mall management, one of the tenants said, has so far refused to budge in responding to the tenants’ pleas for a reduction in the monthly Common Area Management (CAM) charges, which covers, among other things, the cost of promoting the mall, security, utilities and the cleaning of the common areas.
Those charges, which are as high as $17.50 per square foot, were reduced by 50 per cent during the April and May lockdown period, but when the malls in the country were reopened in June, the tenants were asked to pay the full CAM charges.
Speaking hypothetically, one tenant who is considering vacating his store, asked: “What is the logic of Trincity Mall charging me $17,500 a month in CAM fees, when since March I would get two paying customers from Monday through Thursday and a few more on Fridays and Saturdays.”
Speaking more broadly, a real estate agent told Express Business that Covid-19 has resulted in a reduction in the value of retail shopping centres in the last six months.
The much higher level of uncertainty about the future of the T&T economy and of the incomes of potential shoppers—as well as the health restrictions on congregating in groups of more than five in public spaces—has led to many people holding their hands with regard to shopping decisions.
In coming up with a price for the two malls, the liquidators would have to use an investment approach to the valuation, said one property valuation expert, which would involve looking at the current income flows from Trincity Mall and Long Circular Mall (including occupancy rates and the common area charges) and forming judgments about their future income flows.
What the liquidators said
In its sixth report to the High Court, dated June 15, 2020, CL Financial joint liquidators David Holukoff and Hugh Dickson, wrote that the Covid-19 pandemic has had a material impact on the subsidiaries of the group.
“The pandemic has substantially impacted the financial and operational position of a number of trading subsidiaries across the group, including but not limited to: Closure of all non-essential tenants of Trincity and Long Circular shopping malls in line with the Government’s stay-at-home order for all non-essential workers.
“As two of the largest income-generating assets within the Home Construction Ltd sub-group, the immediate closure of tenants significantly impacted the sub-group’s ability to recover rent from its tenants…
“Whilst identified as non-essential for the purpose of the stay-at-home order, these are key trading businesses within the group, which materially contribute to profit and cash generation; their closure has had a significant impact on the cash position of the group and posed a tangible threat to HCL’s overall solvency.”
The joint liquidators have been busy disposing HCL’s assets in order to release value to repay the CL Financial group’s creditors, which are in the main the State and state-owned enterprises:
• In March, following receipt of an order from the High Court, instructions were issued by the liquidators to HCL to sell 3,490,030 shares in Agostini’s Ltd. According to the liquidators’ sixth report: “The pandemic limited market demand for the shares during the marketing process. A sale of 50 per cent of the shares was successfully completed in mid-March to release a value of $39 million to HCL;
• In July, HCL advertised the sale of land along the East -West Corridor. In the sixth liquidators’ report to the High Court, they commented that they “intend to market and sell…about 1,700 acres in line with the sale and marketing strategy sanctioned by the Court.”
• Last Thursday, the Minister of Finance, Colm Imbert, announced in a news release that the Government “pursued the acquisition of CL Marine Ltd and its subsidiaries with the liquidators, and created the National Marine and Maintenance Services Company Ltd, a new wholly owned State enterprise for this purpose. The minister’s news release did not disclose the cost of the acquisition or the procurement process used by the liquidators.
Questions for Holukoff, Dickson
On Monday, Express Business sent questions to the joint liquidators through a T&T-based Grant Thornton employee:
1) What is the logic of the joint liquidators initiating a process to sell Long Circular Mall and Trincity Mall at this time of depressed valuations for retail commercial property?
2) Is this sale process based on credible and recent valuations?
3) If the bids are below the valuations of the mall, do the liquidators have the option of scrapping the sale or will the sale process be completed without regard to the bids?
4) Does this process have the blessing of T&T’s High Court?
5) Are the joint liquidators being pressured by the Ministry of Finance to sell HCL properties because of the length of time and the cost of the liquidation?