Parkson Retail Group says it has been forced to pay US$22 million in what appears to be a bizarre ruling by a Beijing arbiter over a rent dispute.
Parkson entered a voluntary trading halt on its stock in Hong Kong and Malaysia on Monday saying it had inside information to release which may affect its share price.
Late Tuesday, the company revealed to the Hong Kong Stock Exchange it had lost an arbitration case lodged at the China International Economic and Trade Arbitration Commission, with its landlord at Metro City Shopping Plaza, Beijing, where it was forced out of the shopping centre after a series of actions by the owner.
The total amount it has been ordered to pay the landlord is equal to 57 per cent of the company’s total trading profit in 2014.
“The board wishes to inform the shareholders of the company… that, based on a preliminary review of the unaudited consolidated management accounts of the group for the two months ended 28 February 2015 and taking into account the results of the Arbitral Award, the board does not expect that the operating results of the group for the first quarter of 2015 could cover the impact resulted from the Arbitral Award,” the company said in a statement issued late Tuesday.
“The profit of the group for the three months ending 31 March will decline significantly as compared with the corresponding period of year 2014. Shareholders and potential investors are advised to exercise caution when dealing in the securities of the company.”
According to Parkson’s version of events, the company leased space between the first and fourth floors of the Metro City mall on the Fourth Ring Rd in Beijing’s Eastern Chaoyang District in 2006; a total area of 25,140 sqm, for 20 years.
From April 2012, the landlord “repeatedly and unilaterally” requested the tenant to reduce the total area of the premises under the Tenancy Agreement or alternatively terminate the agreement in return for compensation from the landlord equalling three months’ rental payments.
“The landlord had at the same time taken actions adverse to the business of the premises and the tenant, including, among other things, suspending supply of air-conditioning and installing fences at the Plaza and sealing off the main entrances which resulting in the decline in customers,” said Parkson.
In December 2012, the landlord gave 30 days notice to Parkson to vacate the premises and later that month, Parkson lodged an application with the Arbitration Commission seeking to continue trading in the mall and forcing the landlord to remove the fences around the plaza.
But the commission this month ruled that the tenancy had ended in December 2012, ordered Parkson to vacate the premises, pay the landlord RMB 36,757,641, a daily fee calculated of RMB3.46 per square metre for the period from November 1 2014 up to the date on which the premises were surrendered (March 26, 2015), totalling RMB 12,612,738, plus RMB 89,923,270 (being the difference between the amount of rental which the tenant had already paid and the amount of rental which the Arbitration Commission had determined to be payable by the Tenant) and an arbitration fee on top of all that of RMB 1,101,864.
In its statement, Parkson said is is considering its available options, including an appeal to the court in China to overturn the Arbitral Award.
