South African supermarket chain, Shoprite Holdings, faces a legal suit by the owners of the Waterfront Karen mall over rental obligations amounting to KSh. 520 million
The Waterfront Karen mall owners moved to court roughly two months after the continental supermarket chain announced the closure of its Karen branch in April citing reduced foot traffic. Shoprite opted to exit the mall space with less than a year of operation.
The Muguku family, owners of the Waterfront Karen, moved to court demanding payment from Shoprite on the premises that the firm had signed a 10-year lease contract with Shoprite.
Daniel Muguku, one of the directors of the two firms which took Shoprite court said that the firm was expecting Shoprite to make rental payments over the 10-year term of the lease which did not provide for termination.
In the suit, the Muguku family is asking Shoprite to make rental payments in US dollars amounting to $4.88 million (Ksh. 520) million in compensation for the expected loss of income over the lease period.
This follows the argument that as the anchor tenant, Shoprite’s exit caused negative sentiment among secondary tenants over the future prospects of the high-end premises, leading to loss of business.
In response, Shoprite denied being the anchor tenant placing the title on its rival, Game Stores which has more strategic space at the mall.
Further, Shoprite’s General Manager Andrew Mweemba, refuted the claims saying that Waterfront management had misstated facts about the existence of a favourable mix of tenants at the mall, including banks, telcos, branded clothes outlets and ATMs, hence inflating expectations about foot traffic.
The High Court already dismissed a petition by the Mugukus to have the South African retail giant deposit of KSh. 520 million as security for its appearance in court since the six directors of Shoprite are foreigners with no known assets in Kenya.
“There is no allegation in the complaint that each or any of the directors committed fraud of the kind that would make them liable for acts which are ordinarily within the purview of the authority of the company,” said Justice David Majanja in response to the petition.
The matter is set for trial, to determine whether Waterfront is entitled to receive rent for the balance of the lease period.
Shoprite which is currently operating three stores in Kenya has been working on expansion plans in the country.