The operator of Westfield shopping centres in Australia has seen the value of its properties dive by around $4 billion in the first six months of 2020, leading to a loss of $3.6 billion.
The devaluation was the main driver of Scentre Group's (ASX: SCG) fall from a 2019 first half profit of $740 million, with much of the rest explained by a credit charge of $232.1 million, mostly comprising the costs of rental assistance agreements.
The half was tinged by the effects of government imposed COVID-19 restrictions on retailers, which have been gradually eased in most of the country except for Victoria, forcing many to close for long periods of time.
This resulted in Scentre signing rental assistance agreements with more than two thirds of its retail partners in the half, including 1,624 SME retailers; a segment that normally contributes 30 per cent to its retail income.
Under the SME code of conduct, SMEs were able to reduce the amount of cash rent payable commensurate with the decline in sales they may have experienced during the pandemic and post-pandemic recovery period.
"We acknowledge this has been a difficult time for our customers and our retail partners. We have supported our retail partners throughout this period on a case-by-case basis. We have done this without receiving financial assistance from the government," says Scentre Group CEO Peter Allen.
"The shopping centre industry has provided over $1.6 billion of support for retailers during the pandemic. Our industry is unique in that it has provided, and self-funded, a level of financial support beyond any other industry as well as most government pandemic support packages."
"Importantly, the structure of our leases with our retail partners has not changed and remains based on the mutual agreement to pay a fixed rent."
For the six-month period to the end of June 2020 Scentre collected 70 per cent of gross rental billings, and for the months of June and July 2020 gross rental billing collections were over 80 per cent.
Retailers in Westfield centres were impacted by restrictions on store openings and the movement of people. As such, in-store sales for the retailers that traded throughout the first half were 8.1 per cent lower compared to the previous corresponding period.
Further, specialty in-store sales were 12.1 per cent lower compared to the first six months of 2019.
"I am very proud of our team, particularly how we responded and adapted to the significant challenges brought about by the COVID-19 pandemic," says Allen.
"We remained focussed on providing our customers with the ability to continually meet their needs throughout the period. We did this by remaining open as well as implementing, and communicating, the highest standards of health and safety protocols."
So far this year Scentre raised or extended $5.8 billion of additional funding, including $3.4 billion of bank facilities and $2.4 billion of long-term bonds.
The company currently has available liquidity of $4.4 billion, which it says is enough to cover all maturities to January 2023.
"At the onset of the pandemic we acted quickly to secure additional funding, ensuring we are in a strong financial position to see the group through and beyond the volatile period," says Allen.
Even with restrictions in place, Scentre says more than 93 per cent of retail stores were open across the Westfield centres (excluding Victoria), and its portfolio occupancy was 98.8 per cent at the end of June 2020.
All of the 42 Westfield centres remained open and trading during the pandemic.
Updated at 9:52am AEST on 25 August 2020.
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