Melita Finance plc, the finance company of Melite Retail Limited, on Friday announced that its Italian subsidiary has terminated the lease contracts of 10 of its stores after tenants failed to pay rent.

The subsidiary, Melite Properties Srl, which has 18 stores in various locations across Northern Italy, in February terminated the agreements with Giadea Srl, a third-party tenant which did not settle rent payments for January 2024.

Melite Properties holds lease and rental agreements in some of Italy’s most prominent retail areas. It has a property portfolio that has been built up over a 16-year period. Melite Retail was formed in 2015, operating a number of fashion franchises in mainland Europe, including Accessorize, Calvin Klein Underwear, and 3INA Cosmetics brands across Italy. Melite Retail Group’s shareholders are Lidsdale Limited, Alf. Mizzi & Sons Ltd, and MMGH Ltd. Melite Finance is a Maltese company listed on the Malta Stock Exchange.

Melite Finance stated that Melite Properties sent formal requests for payment to Giadea, but they were still not paid. Following that, it submitted a claim with its insurers for reimbursement of rental payments due for January and February 2024, as well as for March, with these three months being covered by the insurance policy in question.

“Notwithstanding the termination of the lease contracts in question, Giadea Srl has abusively retained occupancy of the stores in question, despite multiple solicitations from Melite Properties Srl’s management and Italian legal counsel to vacate the stores,” Melite Finance said.

It affirmed that it is taking legal action with a view to recover possession of the stores in “the most cost-effective and time-efficient manner,” while also safeguarding its interests to receive any unpaid rent.

Should Melite Properties not recover the debt due or face a prolonged delay in recovering the possession of the stories to be leased to new third-party tenants, there would be a “material adverse impact on the financial position of the company,” Melita Finance stated.

Melite Properties’ management is seeking alternative tenants that are willing to take over the stores in question once it regains possession of the properties.

“The company remains in close contact with management on the developing situation and will be providing further updates to the market in due course,” it concluded.

Melite Properties’ portfolio includes stores in various locations across Bologna, Bolzano, Como, Firenze, Genova, Milan, Padova, Pavia, Torino, Treviso, and Verona.

Melite Properties was hit hard by the COVID-19 pandemic, with lockdown in Italy prompting it to shut down some of its stores and find new tenants for others.

During the six-month period ended 30th June 2023, the wider Melite Retail Group registered a pre-tax loss of €133,053, with its future being intrinsically linked to developments in the retail real estate market in Italy. In the financial statements, it had stated that both the retail landscape and the commercial real estate landscape in Northern Italy were subject to “significant and unprecedented disruption as a result of the pandemic.”