Kmart sues Toombul Shopping Centre owner Mirvac sued for $10m over flood closure

Eighteen months after it was announced Toombul Shopping Centre would not reopen due to flood damage, one of the country’s biggest retailers has sued the centre’s owners for $10m.

A key tenant at the shuttered Toombul shopping centre has sued its retail giant landlord for $10m alleging the $8 billion property giant breached their lease when they closed the centre last year.

Kmart Australia Limited (Kmart), owned by retail giant Wesfarmers, sued Mirvac Retail Sub SPV Pty Ltd and Mirvac Capital Pty Ltd - part of the $8b ASX-listed Mirvac - in the Supreme Court in Brisbane on Friday December 15.

They allege in their claim, filed in court, that they had a valid lease until February 2027 and that Mirvac should compensate them for the loss of profit the discount department store would have made in that time.

Kmart alleges that compensation should be calculated based on the anticipated trading if the store had reopened after damage caused by the floods on February 25 and February 27, 2022 was repaired.

The cleanup at Toombul Shopping Centre after the floods. Picture: Lachie Millard

They allege Mirvac’s own estimate of the loss of profit the Kmart store on Sandgate Road, 7km northeast of the Brisbane CBD, would have made during this time is $13.4m, and reduced to $10.1m in net present value.

It alleges that had its lease been on foot in April 2023 when Mirvac settled its insurance claim for damage caused when waters inundated the 54-year-old shopping centre, then Mirvac would have been in breach of its lease with Kmart by not using the insurance payout to repair and rebuild.

Kmart alleges that Mirvac’s insurer had agreed it would indemnify Mirvac in relation to the flood damage.

On April 27 this year Mirvac’s lawyers told Kmart’s lawyer it had settled its insurance claim over the flood with insurer FM Insurance but was “unable to reveal” the dollar value as it was confidential.

Seven months earlier on September 8, 2022 Kmart accepted the repudiation by Mirvac of the Toombul lease and terminated the lease, but it told Mirvac in a letter that Kmart had suffered a “significant loss by reason of Mirvac’s repudiatory conduct”.

They allege the decision by Mirvac to permanently close the centre was a repudiation by Mirvac of the lease.

The exterior of Kmart at the shuttered Toombul Shopping Centre. Picture: David Clark

Mirvac, which owns and manages $11.9b of retail, office and industrial property in Australian capital cities, announced the permanent closure in a media release from CEO Susan Lloyd-Hurwitz on June 9, 2022.

“The situation is heartbreaking and the decision to close Toombul was not taken lightly... the centre’s electricity, fire and escalators were all significantly damaged,” the statement read, according to the statement of claim.

“The Mirvac board then made the very difficult decision to close the centre taking into consideration the extent of the damage, the risk of future flooding,”.

Kmart, which has 324 stores throughout Australia and New Zealand, alleges that the decision to permanently close was “an unequivocal manifestation by Mirvac of an intention not to perform its obligations under the lease including the obligation to.. expend insurance monies to rebuild the centre”.

The devastation left in the wake of last year’s floods at Toombul Shopping Centre.

Mirvac told Kmart and up to 130 other tenants of the shopping centre on about May 20, 2022 that it had “taken the difficult decision to close Toombul shopping centre and terminate all leases”, a month before it announced the decision publicly.

No defence has been filed to the claims and no date has been set for hearing.

Mirvac paid $228.1 million for the 9.9ha Toombul centre in 2016, it was opened in 1967.

On July 18 Brisbane City Council approved Mirvac’s application to demolish the former Toombul Shopping Centre buildings, carparking and shade sails.

Mirvac told council it plans to create a tiny temporary park in the southeast corner of the site fronting Widdop St, and then fence-off the site post-demolition until Mirvac gets approval for its new development, which is still in the design phase.

Approved plans state that the Toombul bus interchange and associated roads will be retained.

Demolition will occur six days a week from 6:30am to 6:30pm, submissions to council state.

Kmart posted $8.3b in sales, up 22 per cent, in the 2022-2023 financial year, and its earnings at the Kmart Group, which includes Target, were up 53 per cent.

In August Wesfarmers announced that Kmart’s sales growth remained strong at the start of the 2024 financial year.

Originally published as Kmart sues Toombul Shopping Centre owner Mirvac sued for $10m over flood closure