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Scentre Group won’t budge on lease agreements

Scentre Group unveiled a $3.6 billion loss for the six months to 30 June, largely due to write-downs on its property portfolio.

Revenue also fell 16 per cent to $1.09 billion, though CEO Peter Allen said the group remained strong on providing customers with the ability to meet their needs through the period by remaining open, and implementing “the highest standards of health and safety protocols”.

“As customers are returning to our centres, more than 93 per cent of retail stores are open across the portfolio,” Allen said. 

The remaining 7 per cent, however, are not all necessarily closed of their own volition. Last week Scentre Group shuttered about 150 stores across the country in an effort to put pressure on retailers playing hardball on rent.

And Allen was bullish on the fact that, moving forward, Scentre Group will be keeping rent agreements exactly the same – with fixed rent costs and annual increases tied into rental contracts.

“The structure of our leases with our retail partners has not changed and remains based on the mutual agreement to pay a fixed rent,” Allen said.

Scentre Group collected 70 per cent of gross rental billings for the six month period, and 80 per cent in the months of June and July.

When it came to Mosaic Brands and the retailers Westfield closed down, Allen said it was unfortunate that it had come to that, but that he hoped it could be resolved.

Mosaic Brands released its results on the same day and CEO Scott Evans expressed that the rental market in Australia has fundamentally changed, and that “some, though not all, landlords accept that reality.”

In response to the growing divide between the expectations of landlords and retailers, Mosaic is gearing up to exit unfavorable leases as they expire over the next two years, which could see as many as 500 storefronts left empty.

Editor’s note: This story has been updated to a correct an error. Scentre Group lost $3.6 billion in the six months to June 30, 2020, not $3.6 million.

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