Mall values slashed

Shopping centre owners reveal high cost of COVID pandemic

AUSTRALIA’S two biggest shopping centre owners have stripped more than $5.5 billion from the value of their properties as the coronavirus crisis up-ends the retail sector.

Scentre Group and Vicinity Centres, which control 102 shopping centres across the nation, have both announced major writedowns on the value of their high-profile portfolios in recent weeks.

Scentre controls the nation’s Westfield empire while Vicinity owns half of the nation’s biggest centre, Chadstone, as well as the Emporium, DFO outlets and a host of suburban malls.

Scentre this week warned it would cut the value of its 42 centres by 10 per cent.

That adds up to $3.8bn, reducing the book value of its portfolio to $34.4bn.

Rival Vicinity late last month slashed the value of its portfolio of 60 malls by 11.3 per cent, or $1.8bn, taking the book value to $14.1bn.

The loss in actual value would be substantially higher, however, given the accounts reflect each landlord’s ownership stakes in the centres. They do not own all the centres outright.

The headline revaluations also smooth out considerable differences between various centres.

Vicinity has cut the book value of its half stake in Chadstone by 7.5 per cent – equivalent to a whopping $508.8m.

While the size of Chadstone means the writedown is the biggest in dollar terms for any shopping centre nationally, the value of Vicinity’s 16 “regional” centres has been slashed by a deep 15.6 per cent.

Shares in both Vicinity and Scentre has almost halved over the past six months as the coronavirus pandemic raises long-term questions over how lucrative bricks-and-mortar retail will be going forward.

Foot traffic at Vicinity’s malls across the nation in late July was down 32 per cent from a year earlier, while commercial real estate agency Jones Lang LaSalle has estimated the vacancy rate at shopping centres is the highest in more than two decades.

Meanwhile, Morgan Stanley expects shopping centre rents to drop 15 per cent to 18 per cent compared with prepandemic levels.

“If all department stores and discount department stores chains rationalise their footprints concurrently, there could be a flood of vacant retail space,” the investment bank said in a research report last month.