It’s been such a tough month for the Palladium that its owners may wish the mall, opened with fanfare late last year, were still serving in its previous capacity as military barracks.
Fire swept through the mall’s electrical systems in late February, leaving stores and offices without power and closing the building for a month. While the mall reopened March 20, the troubles for the Palladium’s owners may just be beginning.
Initial complaints by the mall’s shops and restaurants prompted the Palladium’s management to forgive the rent obligations of all its lessees for the month that it was closed. At 150 euros ($236/3,822 Kč) per square meter, the rent is one of the highest in the city. What didn’t come with this pardon was any willingness to compensate its tenants for lost profits.
Most shops have insurance to cover their claims, or at least they should, Palladium representative Anton Hopfgartner told journalists March 19.
“The tenants should have an insurance plan in place that is supposed to protect them,” he said. The center’s management will negotiate with their clients on a case-by-case basis, he added.
While the mall was closed, most businesses were still paying salaries to employees. And the Palladium’s many fashion boutiques were unable to sell their winter stocks, which are now out of date and have to be replaced.
Turning to the morass of insurance claims, shop owners have found that some of their damages might not be covered by standard policies. And even if stores paid a premium for extra coverage, they may still be unable to file claims: Many fire policies only protect demonstrable damage to stores and not their surrounding electrical infrastructure.
Just a day before the fire started, Starbucks opened its first coffee shop at the Palladium. Exactly one month later, the company gave away free coffee treats to customers.
Now the company is trying to be patient as its insurance company finishes its analysis and calculates losses.
“The Palladium confirmed that it will give away credit notes covering the [rent during the] time of closure,” said Jakub Střeštík, operations director for Starbucks in the Czech Repubic, Poland and Hungary.
But problems remain: Starbucks, which operates in a joint-venture with Poland’s AmRest, will try to reclaim lost profits from its insurer. Should that fail, it will turn to the Palladium’s insurer as a last resort.
Another unsolved issue is the monthly service and marketing fees, which Starbucks will need to discuss with Palladium, Střeštík added.
When the “crisis” started, the Palladium informed its clients sporadically and inadequately, Střeštík said. Communication with clients only improved during the last week of closure.
That’s why small shop owners want to form a pressure group to vent their frustrations, said Jarmila Bělovská, who owns the “1-2-3” fashion store.
“We would like to join forces and send an official letter to the center’s management, which a number of smaller lessees would sign,” she said.
Not only groups of lease holders but also professional claims adjusters have gauged the interest of Střeštík. “So far, we’ll continue to evaluate which route to take and what is in our best interest,” he said.
Satisfied customer
Not all of the Palladium’s tenants are critical of the mall. The mobile operator Vodafone has insurance that covers unexpected interruptions of sales worldwide, said spokesman Filip Hrubý, including its store in the Palladium.
“We will claim a 100 percent rebate on rent during the time the shopping center was closed,” Hrubý said. Vodafone is still evaluating total damages caused, but lost profits might reach up to 1 million Kč, he added.
Vodafone has found Palladium’s management to be helpful during the fire ordeal. Asked if claims adjusters are representing Vodafone to the Palladium, Hrubý said that the company is still waiting for the full technical specifications of what caused the breakdown and will make a decision from there.
The electrical fire, which fire officials said was caused by a technical defect with no human intervention, rendered the glossy building’s 60,000 square meters silent, its facade protected by omnipresent security guards. The Palladium has more than 170 stores and 30 restaurants, bars and cafés, along with offices and 900 parking spaces.
The Palladium’s owner has been keen to avoid damaging its reputation, stressing the building’s safety. Members of the fire brigade told the Czech News Agency that the evacuation took 40 minutes to complete, partly because shoppers were reluctant to leave. The accident proved that the building’s fire alarm and evacuation systems worked well, said Veronika Kozová, a Palladium spokeswoman.
All security systems comply with Czech and European Union norms as verified by Prague’s fire brigade and independent security specialists, she added. The city magistrate’s security board confirmed March 17 that the Palladium has met all its security and evacuation rules, which allowed the mall to reopen.
“The overall risk rating of Palladium is still excellent,” Kozová said.
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