A 45m-euro investment, the shopping centre will close down nine months after the opening moment.
RED Management Capital real estate developer, which has finalised two Armonia shopping centres domestically, will close the project in Braila to reposition it, after tenants' sales were way below expectations and the number of visitors amounted to only 2,000 people in some days.
The closure, set to take place in the following weeks, is the most dramatic decision made by domestic shopping centre developers and will probably not be the last, as long as half of the shopping centres outside Bucharest have weak performance.
"We have certainly not sufficiently researched the Braila market. The project is not drawing enough people, and the level of retailers' prices is above the city inhabitants' purchasing power. We'll close Armonia centre in August to reposition it as a regional discount shopping centre and we hope we can reopen it in six to nine months," Andrew Stear, a managing director and minority stakeholder in the company, told ZF.
The representatives of the company, whose majority shareholders are Warburg Pincus US investment fund and Spain's GED investment fund, say they have notified the tenants and the financing bank about the decision to temporarily halt the project, so that rental contracts, as well as instalments to the bank will be suspended over the following period.
"The bank understands that if the project does not work, it's better for it to be repositioned. It acts as a partner for us in this period," says Stear, without disclosing the name of the bank.
Project development involved 45m-euro total funds, of which almost 30m euros came from a banking loan. The project has a lettable area of 37,000 square metres, of which the area of the shopping gallery stands at 14,000 square metres, with stores being now opened only on 38% of spaces.
Beside Carrefour, tenants include retailers such as Flanco, Sephora, Samsonite or Mondex.
Armonia Center is the second large shopping centre opened in Braila, after the European Retail Park project BelRom Belgian company finalised in May 2008. Both projects include a Carrefour hypermarket, with the one in Armonia to be also closed.
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