This article is from the Australian Property Journal archive
WESTFIELD shopping centres owner Scentre Group has taken a 10% hit on the value of its portfolio, becoming the latest major retail landlord to feel the one-two punch of tough trading environment leading into the pandemic.
The valuation hit reflects just six months of damage. The change is a non-cash item and is not included in the group’s operating earnings or funds from operations.
The group revealed its expects net operating cashflow of over $250 million when it releases its half year results later this month. It did not receive any funds from the Australian government under its JobKeeper scheme.
Scentre maintains available liquidity of $4.4 billion. It will this month review the reduced base board fees and fixed remuneration for its executive team as announced in April.
Meanwhile, the Scentre-managed Carindale Property Trust announced it expects a 14% dent in the carrying value of its assets. The trust co-owns Westfield Carindale in Brisbane’s south eastern suburbs.
Last month, rival Vicinity Centres revealed 11.3% had been slashed off the value of its portfolio of 60 malls, equating to $1.79 billion. Stockland is expecting a 10% devaluation of its retail portfolio, while Mirvac booked a $349 million hit to its retail segment, and GPT a $476 million hole in its latest round valuations.
Major shopping centre landlords have undertaken portfolio optimisation programs over the past 12 to 24 months, and heavy hitters have been moving away from retail assets to the industrial and logistics sector as their shopping centres have their values slashed.
Shopping centre vacancies have hit their highest point in over 20 years, and retailers are beginning to weigh up moves to optimise their store networks beyond the National Code of Conduct and government stimulus measures. The national average shopping centre vacancy rate increased to 5.1% in June from 3.8% in December, according to JLL. Including CBD retail and large format retail, the vacancy rate increased from 4.8% to 6.3%.
The retail sector had already experienced headwinds before the COVID-19 outbreak, forcing Australian retailers including Colette by Colette Hayman, Jeanswest, Bardot and 170 year old department store Harris Scarfe into administration, and fast-tracking space optimisation by the major department stores that extended to asset sell offs by David Jones.
