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Global private equity companies oppose force majeure call

BENGALURU | MUMBAI: Global private equity players with large portfolio of Indian office space and their local real estate partners are unlikely to heed to a growing chorus of companies and retailers asking for invocation of ‘force majeure’ clauses after the coronavirus pandemic disrupted economic activity.

Even amid the nationwide lockdown, operations and maintenance work have continued at the commercial complexes owned by private equity firms like the CapitaLand India,Brookfield Asset Management and Blackstone Group along with partners Embassy Office Properties and Salarpuria Sattva, and other large local firms such as Prestige Estates and RMZ. “Force majeure is not applicable as the clients continue to use the data centre and operate their workforce from home.

Tenants can't use health premise as shelter and not pay rent,” Prestige Group chairman Irfan Razack said.

According to fund managers and builders, their contracts did not allow for invoking the force majeure clause as long as the business parks were operational and buildings had not collapsed.

Also, they said, banks that had lent against future cash flows of these projects were not offering them any leeway on interest payment, so why should they forgo their rent.

“We have got many requests but will not consider force majeure as our parks are operational. We also have financial obligations to banks,” said Bijay Agarwal, the managing director of Salarpuria Sattva. The builder has a commercial development portfolio along with Blackstone in Hyderabad and Bengaluru.

The landlords said they had continued to serve clients even during the lockdown as the companies had maintained minimum staff and operated data servers on their premises. So, force majeure can’t be invoked, they claimed.

“At Embassy REIT, our teams have gone the extra mile to maintain business continuity for our over 160 occupiers, keeping the premises available for their business critical needs. Our occupiers have been able to operate their critical business infrastructure without interruption and understand their obligation to comply with the terms of their leases,” said a spokesperson.

According to property consultant CBRE’s recent survey of occupiers across Asia, more than 70% respondents said they had not received any relief from landlords. The evolving Covid-19 crisis is making companies re-evaluate their commercial real estate strategies, with a focus on enhancing resilience measures.

April 15, 2020

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