Retail Space For Equity

[juinjuin]

Dear retailpreneurs

Not sure if this is something new to you but it is certainly new to me. I have been thinking of something along this line but I am surprised this organisation is actually implementing it!

A certain major landlord is offering rental free space in exchange for Cumulative Redeemable Convertible Preference Shares.

Rental free means for example out of a $5000 monthly contracted lease, you need NOT for the rental portion say $3500. You still have to pay the balance of $1500 for service charge and A&P.

In lieu of this rental free space, you'll need to issue CRPS @ 4% per annum to this landlord on a regular basis, subject to a cap of 49% of your paid up capital or $500,000 whichever is less.

Cumulative means if you don't pay dividends for 1 year, you still need to pay up the next year, and you must pay CRPS shareholders first before common equity.

Redeemable means that the retailer can buy back those redeemable shares from the landlord to avoid dilution of their shareholding.

Convertible means the landlord has the option of converting the preference shares into common equity

Preference means that common equity shareholders can get paid dividennds only after preference shareholders are paid.

Wondering what you people think. Would you consider joining such a scheme which is a bit akin to venture capital funding?

Regards

[Flying Elephant]

My views -

1) only a small % of the retail space within the entire mall is reserved for this. which means, the landlord is very selective of the type of tenant they wanna work with.
2) reading from their last news release, the business need to have at least a capital of $50K (can't remember the exact amount but i know for sure it's not a small sum), which means it's not catered to the lower budget businessman.
3) buying back your shares - unless your business has been booming and has sufficient funds to buy back (which is paying back your 2/3 yrs rental at a go), wat happen if it's a lose? will the shareholder (the landlord) help this tenant like how a typical shareholder of a business? or will the landlord allow this tenant to cease their business (cos not making money), move out and without having to buy back their shares (those so-call worthless papers)

after reading their article, i concluded that this offer will only benefit the big boys in the market and it's of no help to small start ups.

[Cocoon]

Hi.

In my opion, I believe this scheme is an win win situation for new start up business. It is good to test market response prior to your brand and products. However, it is subjective to landlord would they feel confident to purchase your shares. Hahah.....

Of course for established brands, I definely I pressume no one would want to work on this scheme.....agree?

Originally Posted by Flying Elephant

My views -

1) only a small % of the retail space within the entire mall is reserved for this. which means, the landlord is very selective of the type of tenant they wanna work with.
2) reading from their last news release, the business need to have at least a capital of $50K (can't remember the exact amount but i know for sure it's not a small sum), which means it's not catered to the lower budget businessman.
3) buying back your shares - unless your business has been booming and has sufficient funds to buy back (which is paying back your 2/3 yrs rental at a go), wat happen if it's a lose? will the shareholder (the landlord) help this tenant like how a typical shareholder of a business? or will the landlord allow this tenant to cease their business (cos not making money), move out and without having to buy back their shares (those so-call worthless papers)

after reading their article, i concluded that this offer will only benefit the big boys in the market and it's of no help to small start ups.

[EarthlyScents]

To me, this is just one of the strategies that developers use to attract tenants. Yet, in the end, it's like back to square-one. The only thing here is you sort of mortgage a portion of your company shares to them just to ease your monthly rental. My question is, if your business at that particular mall fails to break-even, does that mean the developer will make you pay the full amount? Or, will you need to sell your remaining shares to them to pay back?

New start-ups may benefit from this scheme but in the long run, it doesn't seem to make any sense.