Westfield operator posts $3.6bn loss

Westfield shopping centres operator Scentre Group and property company Stockland have both reported write downs on the values of their assets, pointing to the impacts of COVID-19.

Scentre Group has reported a massive bottom line half-year loss, after writing down the value of its 42 properties in the wake of the coronavirus pandemic.

Scentre Group  posted a net operating loss of $3.6 billion for the six months ending June 30, following the $4.1 billion write-down as well as a $232 million credit charge related to the pandemic.

Revenue from its properties totalled $1.1 billion, down 16 per cent compared to the same period last year.

"In-store sales for our retail partners were impacted by the pandemic and the associated restrictions on people movement," Scentre said.

Total like-for-like in-store sales fell by 8.1 per cent while in-store speciality sales dropped 12 per cent, with the worst declines occurring in NSW (14.2 per cent), Victoria (14 per cent) and New Zealand (19.8 per cent).

But chief executive Peter Allen said while this had been a difficult time for customers and retail partners the underlying fundamentals of the group's business remained strong.

"The business is well-positioned to deliver long term sustainable returns for security holders through economic cycles," he said in a statement.

"We own and operate major essential social infrastructure in the best locations close to where people live.”

At the close of trade, shares in Scentre Group were up 4.46 per cent at $2.11.

Stockland devaluates assets

In the 12 months to June 30, Stockland reported $825 million in funds from operations, down eight per cent on FY19.

The group said this was largely due to COVID-19, with a statutory loss of $14 million including COVID-19 impacted net devaluations in commercial property of $464 million and net fair value decline of $116 million in retirement living.

Net operating cashflows of over $1.1 billion reflected strong residential settlements; a gearing of 25.4 per cent compared with 26.7 per cent at 30 June 2019.

Stockland managing director Mark Steinert said the full year results reflected the benefits of a diversified portfolio, in light of the economic challenges presented by the Australian bushfires and the COVID-19 pandemic.

“We have tackled these challenges proactively and decisively, responding to these unprecedented events to both protect our business and position us well for the future,” Mr Steinert said.

“We continued to successfully execute our group strategy throughout the year despite these challenges and this is reflected in the underlying performance of the business.

“FFO was down 8.0 per cent to $825 million and FFO per security was 34.7 cents down 7.2 per cent, reflecting COVID-19 impacts across our business particularly on our Retail Town Centres, offset by growth in Communities, Workplace and Logistics. 

“We proactively reduced costs, curtailed non-essential expenditure, boosted liquidity and improved gearing as a result of strong cash flow performance.

“As restrictions eased our business has been able to scale rapidly to meet demand as foot traffic returned to retail town centres and government stimulus re-energised the residential sector.”

Mr Steinert pointed to the rebound in Stockland’s sales and enquiries during May 2020 and June 2020.

“Residential settlements of over 5,300 lots were strong reflecting customer preference for masterplanned communities and demand driven by government stimulus,” he said.

“We have approximately 4,300 contracts on hand at 31 July 2020 giving reasonable coverage for FY21 settlement volumes.”

Stockland’s entire Commercial Property portfolio (excluding sundry properties) was independently valued resulting in a net valuation decline of $464 million compared to the estimated book value at 30 June 2020.

The group said the difficulty in predicting the future implications of COVID-19 on the Australian real estate sector had resulted in independent valuers adopting a range of qualifications, including material uncertainty clauses.

Despite the write-downs, Stockland said it remained in a strong capital position.

In the second half of the financial year, Stockland raised $790 million in long-term and short-term debt, which it said would maintain capital strength through the current period of economic disruption.

At 30 June 2020 the group had available liquidity of $2.0 billion with $260 million of debt maturing through to June 2021, with a weighted average debt maturity of 5.7 years. 

At the close of trade, Stockland shares were up 6.34 per cent at $3.86 per share.