By David Winning
SYDNEY--Scentre Group reported a deep first-half loss, as the coronavirus pandemic deterred many shoppers from visiting its malls and weighed on valuations of retail property assets.
Scentre, which owns and operates nearly 40 Westfield branded shopping centers, reported a net loss of 3.61 billion Australian dollars (US$2.59 billion) in the six months through June. That was down from A$740.0 million at the same stage of the previous year.
Scentre said the valuation of its property portfolio fell by A$4.08 billion at the end of June. Management had signaled an around 10% decline was likely earlier this month.
Funds from operations--a smoothed measure of operating cash flow that excludes depreciation, amortization and gains on asset sales--fell by 46% to A$361.9 million in the six-month period. Scentre said its funds from operations was dragged down by an expected credit charge of A$232.1 million related to the impact of the pandemic.
Scentre said it was able to collect 70% of rent during the half-year period as the pandemic caused many tenants to seek assistance after restrictions imposed to suppress the coronavirus meant they weren't able to open their doors for several weeks. For the months of June and July, gross rental billings collections were more than 80%.
"As customers are returning to our centers, more than 93% of retail stores are open across the portfolio (excluding our Victorian centers)," said Chief Executive Peter Allen. "Portfolio occupancy was 98.8% at the end of June."
The impact of the pandemic risks stretching Scentre's balance sheet, despite A$4.4 billion of available liquidity at the end of June. Many analyst had considered the company's finances to be stretched even before the pandemic and had urged the sale of some assets, which may now be hard to do given dark clouds over the retail sector.
Scentre said its gearing--a measure of debt relative to equity--was 38.4% at the end of June. That's within its target range, but Macquarie noted this month that Moody's Investors Service threshold is 45% for a downgrade of its A2 credit rating.
On Tuesday, Scentre confirmed it wouldn't provide earnings or distribution guidance.
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