Far East Organization launches scheme to help new retailers

Source : Channel NewsAsia – 14 Jul 2009

Property developer Far East Organization has launched a scheme to encourage start-ups at its shopping malls. Instead of paying rent, these tenants can issue preference shares to the developer for up to three years.

Tenants at six Far East Organization malls – including the new Orchard Central – can now pay rent in shares, instead of cash. The other participating malls are Central, Far East Square, Pacific Plaza, Square 2 and West Coast Plaza.

Eddie Yong, executive director, Investment Properties, Far East Organization, said: “We are fulfilling the market desire to have more variety of shops and tenants in Singapore shopping malls.

“With the opening of Orchard Central, we feel that we have a spread of malls across Singapore to offer our would-be tenants a choice of suitable spaces for them to consider setting up shop.”

Under the new Rental Space for Equity Programme, tenants will sign a two- or three-year lease with Far East. During this period, they will issue redeemable, convertible and cumulative preference shares instead of paying their monthly base rent.

Tenants can issue these shares up to a cap of 49 per cent of their paid-up capital or S$500,000, depending on which is lower. At the end of the lease period, they can buy back those shares by paying the full rent, plus 4 per cent interest.

Alternatively, they can ask Far East to be a partner in the business, in which case the developer will convert its preference shares into ordinary shares in the retailer’s firm.

Far East has set aside 5 per cent of the space in each of the six malls for the scheme – equivalent to about S$6 million of rental space annually.

The programme is open to first-time retailers as well as existing retailers who want to expand their presence.