Westfield Owner Scentre Group Posts $3bn Loss

Westfield mall owner Scentre Group has posted a $3.6 billion loss, highlighting the challenging retail environment for landlords and retailers in its half-year update.

The ASX results come as news that escalating rent battles had prompted the mall landlord to start locking out non-rent paying retailers from their stores last week.

Scentre’s rent collections were down approximately around 48 per cent in the June quarter, reflecting the impact of Covid-19.

In its Tuesday results, released for the six months to 30 June, Scentre announced it had collected more than 80 per cent of gross rent for the months of June and July.

“We acknowledge that this has been a difficult time for our customers and our retail partners,” Scentre chief executive Peter Allen said in the update.

“We have supported our retail partners throughout this period on a case-by-case basis. We have done this without receiving financial assistance from government.”

The shopping mall landlord has been hit by a large number of rental relief claims from tenants as a result of Covid-19.

Allen said the group had made agreements with 2,438 of its 3,600 retail partners, including 1,624 small and medium-sized retailers.

But an escalating rent dispute saw Scentre last week lock Mosaic Brands out of its Westfield malls. 

ASX-listed Mosiac, owner of Rivers, Millers, and Noni B, announced that 129 of its stores in Westfield centres across Australia had been temporarily closed by Scentre.

In its own annoucnement on Tuesday, Mosiac said it would look to close up to 500 of its 1300 stores over the next 12--to 24 months.

As for Australia's largest retail landlord, Scentre's major financial blow comes as the coronavirus continues its second wave, dragging on valuations of retail property.

The company’s result also saw Scentre Group take a $4 billion hit on property valuations.

Related: Vicinity Retail Results Reveal $1.8bn Loss

Tuesday saw Scentre book an interim loss of $3.61 billion. 

By comparison, in Scentre’s 2019 interim report, the group tabled $740 million in profit.

The result includes property write-downs of $4.08 billion. 

For the six months to June, Scentre posted operating earnings of $3.61 billion and funds from operations $3.62 billion.

Moody’s Investors Service expects Scentre’s credit metrics will deteriorate materially in 2020, given increased net debt and reduced asset values.

“Nevertheless, the group’s operating metrics have started to improve, with cash collections holding at or above 80 per cent for June and July,” Moody's vice president Matthew Moore said.

“The group’s ability to maintain an appropriate credit profile for its ratings will ultimately depend on its ability to sustain an improving trend in operating metrics over the next 12-18 months, and on its ability and willingness to reduce debt in line with the decline in earnings.”

Scentre noted that more than 93 per cent of retail stores are open across the retailer’s portfolio, excluding Victorian centres due to renewed-restrictions.

Allen added that portfolio occupancy was 98.8 per cent at the end of June 2020.

Scentre said it would not be providing earnings or distribution guidance for the full year. The group’s shares were trading at $2.11, closing Tuesday up 4.5 per cent.