This article is from the Australian Property Journal archive
SCENTRE Group has reportedly issued at least eight formal notices of lease breach to David Jones’ new owner Anchorage Capital Partners for stores within its Westfield shopping centres.
The issuance, reported by the Australian Financial Review, comes weeks after it was reported that Scentre, had decided against allowing the new private equity owners to take over as a counterparty on the typically long-term leases from previous owner, South Africa-based Woolworths Holdings.
Scentre could lock David Jones out of its stores, or terminate individual lease agreements.
David Jones has 19 stories in Westfield shopping centres, accounting for about 6% of Scentre’s portfolio lettable area.
Multiple reports have put the David Jones acquisition price at $100 million, but the Financial Review has suggested this could be as low as $80 million, with just $40 million coming from Anchorage and $40 million from debt.
Woolworths Holdings acquired David Jones in 2014 but incurred hefty writedowns of more than $1 billion as the department store chain suffered through retail headwinds such as online shopping, and more recently the impact of COVID.
Anchorage’s difficult run in retail saw it acquire Dick Smith Electronics from Woolworths in 2012 for $94 million, before listing it on the ASX a year later for $520 million. The company collapsed two years later. Meanwhile, Anchorage-owned Scott’s Refrigerated Storage fell over last month.
David Jones has been undertaking a store rationalisation program, with former owners Woolworths Holdings last year targeting 36,000 sqm in cuts just ahead ending its direful affair with the chain in December.
Rival department store Myer has just made the decision to not exercise its lease renewal at the Myer Centre in Brisbane – a move that will trigger the biggest shake-up of the city’s retail landscape in decades – following a dispute with landlords Vicinity Centres and ISPT over the terms of a new lease, and it is threatening to walk away from the Myer Centre in Adelaide, alleging that Singapore-listed landlord Starhill Global REIT has breached terms of the lease “by maintaining the Myer Centre Adelaide in a condition whereby it is substantially empty of suitably presented retail stores”.
The two department stores have also turned to last-mile logistics and warehousing to keep costs down, as industrial space is cheaper compared to space within shopping centres. Experts estimate that Myer and David Jones have handed back over 100,000 sqm of shopping centre space being used for storage, saving tens of millions of dollars in rent every year.
