Shopping centre owners have been slammed by the latest clampdown on retail in Victoria with restrictions hitting larger regional shopping malls particularly hard as they rely on discretionary retail and department stores.
More stores are expected to close in coming days with department stores that anchor shopping centres tipped to shut for weeks in Melbourne while Stage 4 restrictions are in place.
Larger shopping centres will be hit as only essential services like supermarkets and pharmacies remain open and discretionary categories like clothing and furniture are shuttered.
Malls stocks were hit on Monday with Scentre Group, operator of the local Westfield empire, sliding by 5.6% to close at $1.925. Vicinity Centres, that has a heavy exposure to Melbourne, also off by 2.7% to $1.27.
GPT, which has a major exposure to Victoria, including Melbourne’s Highpoint, dropped 3c to $3.85, while developer Lendlease that is building the multibillion-dollar Melbourne Quarter precinct dipped 3.1% to $11.
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But shopping centres are expected to bear the brunt of the tough new restrictions that are likely to spark a new round of disputes with major chains seeking rent relief and smaller operators unable to recover and rents at the same level.
For large centres like Chadstone, owned by the listed Vicinity Centres and billionaire John Gandel, the challenge has switched from staying open for essential services, while keeping customers aware of cases, to managing a deeper shut down.
Chadstone on Monday confirmed that a worker in a fashion store had coronavirus when working in late July. The General Pants staffer last worked on July 23, ahead of the imposition of tough Stage 4 restrictions.
“Our team has been notified that there is a confirmed case of coronavirus, a team member from General Pants who last worked in the store on Thursday 23,” Chadstone said in a statement.
“General Pants are working closely with the Department of Health and Human Services and we are making contact with each of our retailers as a precautionary measure,” the statement said.
A Myer employee at the Northland shopping centre in Melbourne‘s north also tested positive to coronavirus last month and there have also been cases in NSW, notably the Thai Rock restaurant at the Stockland shopping centre in Sydney‘s Wetherill Park suffering an outbreak.
Goldman Sachs said the six-week lockdown would have direct and significant implications for Chadstone co-owner Vicinity, given about half of its portfolio by value is in Victoria.
Retail stores were permitted to stay open last month during Stage 3 lockdown measures, but the analyst said even then there was a risk that retailers would voluntarily close during the lockdown period.
Goldman’s Jeffrey Pehl, Ian Randall and Sam Watson allowed for 12 weeks of rental abatement for Vicinity‘s Victorian portfolio as a result of the Stage 3 lockdowns, which they said captured the impact of the announced Stage 4 lockdown restrictions for metropolitan Melbourne. Vicinity last month announced its June asset net valuations declined 11.3 per cent, the bottom end of its previous announced draft asset valuations range of 11-13%, representing a $1.79bn decline over the half.
Investors are worried about the flagship portfolio — Chadstone, premium CBD and DFO outlets — which had a net valuation loss of 8.8%, with concerns a continued challenging environment could result in further asset valuation declines.
The analysts said the continuation of COVID-19 for longer than its estimates allow would also lead to further downside.
