BMD We Will Pay 3 Billion Lira Exchange Difference to Shopping Malls This Year
BMD President Öncel stated that foreign currency rental costs increased by 70 percent compared to 3 years ago and said, "Our rental cost, which was 4.1 billion TL in 2015, has reached 7 billion TL today. We will pay an extra 3 billion TL this year to shopping centers that insist on the daily exchange rate."
The cost of the insistence of some shopping malls, mostly controlled by foreign investors, on rent at daily exchange rates is getting heavier every day. The retailer will have to pay at least 3 billion TL more to shopping centers this year compared to 2015 due to the exchange rate difference.
Sinan Öncel, President of the United Brands Association (BMD), underlined that the insistence of some shopping malls under the management of foreign groups to rent in foreign currency threatens the future of organized retail in Turkey. Öncel demanded an urgent legal regulation against the imposition of rent at the daily exchange rate by shopping mall managements.
Sinan Öncel, who evaluated the issue of rent in foreign currency at the Foreign Expansion (YDA) meeting organized by BMD, said the following:Basket Exchange Rate Increased by 70 Percent in 3 Years from TL 2.70 to TL 4.61
"The calculation is very simple. There are 12 million square meters of leasable area in shopping malls in Turkey. The retailer pays rent for 35 percent of this area, i.e. 4.2 million square meters, at the daily exchange rate. If we calculate over the lowest square meter rental price of 30 dollars / euro basket, our rental costs have increased by 70 percent in 3 years. Our annual cost, which was 4.1 billion TL in 2015, has reached 7 billion TL today. We will pay at least 3 billion TL extra this year to the shopping centers that insist on the daily exchange rate. With this figure, we could have opened 10 thousand stores or employed 54 thousand people for a year with a gross salary of 5 thousand TL.
We are worried that the cost will become much heavier in the coming period. Because we do not know where the trade wars between the US and China and the escalating Russia-US tension will take the exchange rate at the end of the year, we expect a legal regulation from our government within the market rules. On the other hand, we would like to thank the shopping malls that supported our brands in the face of the troubles in our region, did not take refuge in any excuse, showed understanding and kept the exchange rate low."
Sinan Öncel reminded that BMD has repeatedly drawn attention to foreign currency leasing and continued his words as follows:AYD President's Statement is 'Irrational' and an Example of 'Black Humor'
"Yılmaz Yılmaz, our chairman in 2011, held a press conference and underlined the risks that dollarization posed to our economy. Seven years have passed. Hulusi Belgü, President of the Association of Shopping Center Investors (AYD), announced last week that 'we can switch to TL after 10 years'. We consider this 'irrational' suggestion of Belgü, who misinforms the public with so-called research without depth, as an example of 'black humor'.
We have not received any response to our call for negotiations under the umbrella of the Turkish Federation of Shopping Centers and Retailers (TAMPF). Our suggestions on this issue, which we have previously shared with the public, are still valid."6-Point Proposal for a Permanent Solution to the Foreign Currency Rent Problem
Sinan Öncel listed the solutions to the problem of rent in foreign currency as follows:Lease agreements that are not in line with current market realities should be renewed as soon as possible.
Those who wish can still pay their rent in foreign currency, but brands should definitely be offered a TL option in new projects.
As with borrowing in foreign currency, leasing in foreign currency should also be restricted.
Legislation should be updated in a way that does not enslave our brands to the exchange rate.
The retailer should be able to exit the loss-making store without penalty with three months' notice.
The 'win-win' formula and 'turnover rent' practice applied in many shopping malls in our country should be made widespread.
Yilmaz Yilmaz Dollarization Harms Citizens as well as Retail
Speaking at the YDA meeting, Yılmaz Yılmaz, Chairman of the Board of Directors of Koton and a former president of BMD, said that the foreign currency-based trade and leasing system has an effect that will disrupt the balance of the markets. Stating that the fact that debts and rents are denominated in foreign currency and revenues in TL creates a deficit position in the retail sector, Yılmaz continued his words as follows: "Dollarization harms Turkey and retail as well as citizens. While on the one hand, 'branding and high value-added production' is being talked about, on the other hand, fashion retailers and brands face additional burdens due to rent invoices issued at daily exchange rates. The current situation negatively affects the development of our brands, the transition to modern retail, competitiveness, and Istanbul's claims of being a shopping and fashion center. Despite all the problems we are experiencing, our brands are performing very successfully both in Turkey and abroad. Our brands, which do not want to put all their eggs in the same basket due to increasing domestic costs, have recently accelerated their search for foreign markets. We are here today to share our knowledge and experience."
Yılmaz Yılmaz added that the legislation should be amended for a permanent solution on rent, which constitutes one of the most important items that increase costs in the retail sector.Sami Kariyo: It's Time to Say Something Together
Former BMD President and Penti Chairman Sami Kariyo said that it would be enough to look at producer and consumer inflation to see the effect of the exchange rate on costs. Noting that the PPI has been 3 points higher than the CPI in recent years, Kariyo continued as follows:
"Since we are able to increase prices below inflation in the retail sector, our profitability is decreasing every year. There is a serious problem. Until today, both shopping malls and retailers have identified the situation from their own perspectives and said what they had to say. Now we have to say something together and unfortunately there is not much time ahead of us. If we can't say something together, I don't see an option other than listening to others." Retail's Growth Plans and Investment Opportunities Abroad Scrutinized
In the meeting organized by BMD in cooperation with Alkaş Consulting, the growth plans of retail and investment opportunities abroad were examined. At the meeting, Yılmaz Yılmaz and Sami Kariyo, as well as the top executives of brands including LC Waikiki E-Commerce Director Salih Yılmaz and Mavi CEO Cüneyt Yavuz, shared their experiences abroad.
Pule Isaac Malefane, South Africa's Ambassador to Turkey, and Tshepo Ranamane, South Africa's Trade Counselor for Economic Investment and Policy, explained the investment opportunities in textiles, ready-to-wear clothing and retail in their countries.
In the meeting, PwC Turkey manager Adnan Akan, Related Digital CEO Sedat Kılıç, Nebim Board Member Murat Demiroğlu, K1 Karree Shopping Center CEO Ömer Nohut and Murat Karadağ from CEVA Logistics gave information about the developments in their sectors with their presentations.
President İlker Karataş, Cüneyt Mutkan, Yako Mizrahi and Berat Kayışkan from OTİAD attended the Foreign Expansion (YDA) meeting organized by BMD.3-YEAR CHANGE IN EXCHANGE RATE
Years
Dollar
Euro
Basket rate
2015
2,6
2,8
2,7
2016
2,86
3,26
3,06
2017
3,73
3,95
3,89
2018
4,13
5,10
4,61
