NAIROBI: French retailer Carrefour has applied for a 20-year exclusivity deal at Two Rivers Mall, which is being developed by Centum Investment.
Typically, commercial leases in Kenya are granted for seven years but are open for renewal. This means the proposed tenancy at the Nairobi development could be seen as uncompetitive by locking out prospective tenants for two decades.
In the agreement, Carrefour will determine which other tenants can be admitted to the mall as part of the concessions granted to anchor tenants.
Centum and the international retailer are now seeking an exemption from the Competition Authority on the lease deal. The international retailer has already signed up as the master tenant.
“... the Competition Authority of Kenya (CAK) wishes to notify the public that Majid Al Futtaim Hypermarkets Limited and Two Rivers Lifestyle Centre Limited have made an application for exemption of their proposed seven-year lease agreement renewable on the same terms and conditions for a further period of 13 years,” CAK Director General Wang’ombe Kariuki said in a gazette notice.
Majid Al Futtaim Hypermarkets will trade as Carrefour.
Mr Wang’ombe’s notice now requires any entities, such as other retailers eyeing the space and who are opposed to the 20-year lease agreement to share any objections before his agency approves it.
Two Rivers Mall, which is being developed in the Blue Diplomatic Zone in the Gigiri area of Nairobi, is touted to become the biggest commercial development in sub-Saharan Africa, outside of South Africa.
Centum will be barred from developing a shopping mall within a radius of 7.5 kilometres from Two Rivers, in details of the lease that have come to the fore in CAK’s call for objection.
Carrefour will also be barred from operating an outlet within a radius of 5 kilometres from Two Rivers “if such operation is likely to materially damage the viability of the business carried on from the mall”.
Competition laws demand that any agreements entered between any entities do not lock out other potential players.
Shopping malls are generally a new phenomenon in Kenya, but the terms of such commercial leases have been viewed as uncompetitive in more developed economies.
In South Africa for instance, the Competition Commission has been drawn to revisit the contentious issue of exclusivity in lease agreements between the owners of large shopping centres and anchor tenants after receiving a fresh complaint about the effect of such agreements on competition in the retail market.