Struggling Rivers, Millers stores given 20% rent reduction
Specialty Fashion Group is believed to have struck a deal with one of its landlords, Scentre Group, after the owner of Australian Westfield-branded shopping malls is said to have agreed to lower the retailer’s rents by as much as 20%.
Such a move is expected to put Specialty Fashion Group, the owner of brands such as Millers, Katies and Rivers, back on a sure footing after a string of losses that led to corporate restructuring advisers breathing down its neck over the past year.
Scentre Group declined to comment on the rent reduction.
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Its is understood that shopping mall landlords had been preparing to reduce rents for the listed Specialty Fashion, which is up for sale through Luminis Partners, given there are close to 1000 stores within its portfolio.
Any forced store closures would leave a significant number of vacancies in shopping centres across the board.
While rental incentives of up to 20% are said to have been offered, the understanding is that the company had been lobbying for reductions of 25 per cent in rent.
Landlords are fielding many requests from unhappy tenants worried that high rents are making their businesses unviable.
Shopping centre owners have traditionally taken a hard line when dealing with unhappy tenants but are now having to make concessions in the face of sluggish consumer spending, the growth of online retailing and a drop-off in foot traffic.
The ailing business model of shopping centres is being put under further pressure by the struggles of major department stores, Myer and David Jones, as well as discount department stores, and fashion retailers that are vulnerable to online retailing.
Smaller luxury handbag retailer Oroton has also been in talks with its landlords about a rescue plan after it collapsed, involving rent reductions of 40%. Rent negotiations between Oroton’s backer, Will Vicars, and a string of nearly 20 landlords were close to being finalised last month.
The expectation at the time was that landlords would take a more stringent approach to Oroton, given that it only had 50 stores, so less was at stake for the landlords.
Also in talks with its landlords is Retail Food Group, after announcing last week that it would close 200 stores within its stable.
The franchisor of Gloria Jeans, Donut King, Brumbies Bakeries and Michel’s Patisserie posted a $87.8 million loss for the six months to December.
This article originally appeared on www.theaustralian.com.au/property.
