Westfield rent collection lifts to 96% despite disputes
Local Westfield owner the Scentre Group is reaping more rent from its malls as it recovers from the coronavirus crisis but is still in dispute with about 11% of its retailers over concessions they are seeking to cover the worst of the pandemic.
The company, led by Peter Allen, says its operations are recovering but a mix of small retailers covered under the Morrison government’s leasing code and larger chains are yet to strike deals with the landlord.
The September quarter was also marked by lockouts of brand chains, including Noni B owner Mosaic Brands and Strandbags stores, although both disputes were settled.
Property executives report that Scentre has also taken a hard line in chasing up rents, which could backfire longer term as it seeks to lure tenants into signing up again in its malls, although they said it had also been effective in generating payments.
Some chains, led by Solomon Lew’s Premier Investments, have flagged they are pushing for turnover-based deals, which Scentre has so far rejected, and department stores have flagged they want to cut back their spaces.
The landlord has struck rental deals with 89% of the 3600 brands in its malls but said it was in talks with 301 small retailers and 112 larger chains.
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Scentre is also collecting more cash from its malls but vacancy rates have also crept up in a sign of the structural challenges the mall industry is facing.
The Westfield owner reported a pick-up in rental collections as more retailers reopen after lockdown. About 92% of stores are trading across Australia and NZ with more in Victoria expected to reopen in coming weeks.
Peter Allen, chief executive of Westfield shopping centre owner Scentre Group. Picture: Hollie Adams
During the 10 months to October 31, the group collected $1.62bn in rent, an increase of $746m since June 30. Scentre said it had collected $187m and $203m of gross rental billings in September and October.
The landlord, which controls 42 centres across Australasia, is yet to reinstate earnings guidance but says rent collection is now running at 96%, well above its April low of 28% as the coronavirus shut down all but essential outlets.
Collections were back to 86 per cent in August and 88% in September and include rent billed earlier in the year. Scentre appears to be collecting some of the $120m not paid in the first half of the year.
Macquarie analysts said the cash shortfall was “flattening” and Scentre malls were running in line with rival operators. Occupancy dipped to 98.4% and Macquarie expects pressure as support programs for tenants wind down.
Sales growth from major retailers came back in the quarter but sales in specialty stores sparked some concerns as in NSW they were 7.9% below this time last year, which may be partly due to softer trading in Westfield Sydney.
Major operators performed well in South Australia and Queensland and comparable specialty store sales dipped 1.9% in the September quarter, a pick-up on the first of the year when they were off by 12.1%.
Macquarie analysts said cash collection was a positive but other indicators, such as the increase in vacancy and shortfall in specialty sales in NSW, were “key negative items”.
Scentre reaffirmed that it intended to pay a distribution in early 2021 from surplus net operating cashflows received during the 2020 year.
Scentre shares rose 5c to $2.38.
This article originally appeared on www.theaustralian.com.au/property.
