US (HAWAII). DFS Group Ltd. will pay the state US$25 million and begin negotiations for rent relief following a 60-day pact signed on Friday between Governor Linda Lingle and DFS chairman and ceo Ed Brennan.
Friday has been the extended deadline offered to DFS Hawaii to pay the US$49 million the state claims is owed to it in back rent. The travel retailer refused to pay the amount without rent relief in light of the slump in traffic and spend caused by a series of events in the post-September 11 climate. The state subsequently sued DFS, accusing it of paying US$100 million in loan repayments to its parent company LVMH Moët Hennessy Louis Vuitton, an amount far greater than its dues to the state.
Though DFS disputes the amount owed, its main focus is to renegotiate its contract with the state Airports Division to reflect the sharp reduction in international visitors.
“The parties have signed this memorandum of agreement because they believe it is in the best interest of all concerned to determine if there is a possible resolution before further pursuing litigation,” said a joint statement by the governor’s office and DFS.
“This agreement does not resolve the parties’ disputes about what DFS or others may owe. DFS disputes the state’s claims, and it keeps the right to seek a refund of this US$25 million payment, and to seek other relief. The state keeps the right to demand the full amount the state claims it is owed.”
The state and DFS have agreed not to pursue further legal action during the negotiation. The state’s pending lawsuit will be put on hold.
The news completed a good week for DFS. On Thursday, it resolved a similar situation with Los Angeles International Airport. According to Pacific Business News, DFS agreed to pay US$37 million owed from 2002 in return for switching from the current Minimum Annual Guarantee formula to a rising percentage rent.
As previously revealed on The Moodie Report, DFS will pay Los Angeles World Airports 23% of gross receipts in 2003 and 27% in 2004. There is also a tiered percentage rent structure for the first five months of 2005 as follows: 28%, 32.5%, 36.5%, and 39%, based upon the annualized level of gross receipts. On 31 May 2005 there is then a US$5 million “deferred” concession payment due in consideration of the reduced payment levels.
