Without Lights, Stockmann Closes Its Doors

VedomostiSmolensky Passazh management cut off Stockmann's electricity Tuesday.
International department store chain Stockmann closed its flagship Moscow location until further notice Tuesday, after the property's landlord unexpectedly cut electricity as part of a worsening rental dispute, a Stockmann official said.

The power shutoff at the store in elite Smolensky Passazh shopping mall came without warning Tuesday afternoon, stopping escalators and elevators and turning off refrigerators, said Jussi Kuutsa, Stockmann's international development director.

Kuutsa said the Finnish-owned department store was going to court to try to force the landlords to restore electricity and pay compensation -- but refused to predict how long the downtown location would be closed.

"We will try to open as soon as possible, but in Russia that could be a long time," he said.

The dramatic move came after Stockmann won a decision in Moscow's International Commercial Arbitration Court on April 30 forcing the mall's owner, Smolensky Passazh, a subsidiary of Mosstroiekonombank, to allow the firm to exercise an option on a new 10-year lease.

"After the court case, they threatened that they would do things to disrupt the working of the store," Kuutsa said. "That is why they used these self-help methods, meaning that we had to close the store."

Opened in 1998, the Smolensky Passazh store has sales of around 70 million euros per year and has become a lifeline for many expats living in the city.

The original 10-year lease ran out at the end of April, and Mosstroiekonombank was disputing Stockmann's rights to take up the renewal option, arguing that the company was paying well below the market rate for the location.

Stockmann said it was paying $4.8 million a year for a space of 8,000 square meters, or about $575 per square meter per year, Vedomosti reported May 6.

"We had no intention of breaching our contract with Stockmann -- it is not easy finding a client willing to take on 8,000 square meters," said Eleonora Emir-Shakh, deputy director at Smolensky Passazh, Vedomosti reported. "But the rent they pay is 1/10th the going market rate."

The April 30 court decision ruled not only that Smolensky Passazh had to extend the lease agreement, but also that Mosstroiekonombank could raise the rent, citing article 40 of the Tax Code, Vedomosti reported.

Neither Smolensky Passazh nor Mosstroiekonombank could be reached for comment Tuesday.

Stockmann operates four stores in Moscow, including three at Mega malls located in city's north, south and east.

With refrigerators down and the tills quiet, perishable food at the flagship store could start rotting on the shelves, Kuutsa said.

The company plans opening a fifth, 8,000-square-meter store this year in the new Metropolis Shopping Center, in the north of the city along Leningradskoye Shosse, and Kuutsa said the current problems with the Smolensky Passazh group had not led them to reconsider their plans in Russia.

"We are considering this as an isolated case and a problem with this specific landlord," he said.