Sussan's Naomi Milgrom refuses to pay landlords rent

Businesswoman Naomi Milgrom - fresh from receiving Australia's highest Queen's Birthday Honours medal - is facing down angry landlords after penning a letter declaring her Sussan Group will not pay rent for April and May and will reopen stores with rent as a proportion of sales turnover.

Naomi Milgrom, one of Australia's richest women, is refusing to pay landlords rent.Credit: Stephen Todd

The declaration by the multi-millionaire businesswoman and prominent philanthropist - who controls retail brands Sussan, Sportsgirl and Suzanne Grae - is the latest salvo in a bitter rental battle being waged between retailers and landlords as the financial fallout of the coronavirus pandemic escalates.

Ms Milgrom joins billionaire Solomon Lew who during the pandemic decreed his 1200 stores would not pay rent, saying they would reopen paying only a percentage of gross store sales rather than fixed rent as before.

Hundreds of landlords, including Australia's large shopping mall owners Vicinity Centres and Scentre Group, are likely to be affected.

Mr Lew's brawl with landlords predates the pandemic, with the retail veteran accusing property owners of gouging tenants and refusing to face the reality of declining store sales and ascendance of online shopping.

But while the big businesses brawl, small landlords, pensioners and self-managed super funds are being caught in the fallout.

'We’ve worked hard and paid our taxes. It’s a bit of a kick in the guts,' said Peter Radford.Credit: Simon Schluter

Melbourne-based self-funded retirees, Cheltenham couple Peter and Robyn Radford, depend on the regular income they get from an unlisted property trust that owns a BP service station in Cranbourne, among other property assets, where Red Rooster is a tenant.

At the height of the crisis Red Rooster's owner - private equity group PAG Asia Capital - also unilaterally decided to stop paying rent and move to paying as a proportion of sales.

"We've worked hard and paid our taxes. It's a bit of a kick in the guts when you have this sort of thing hitting you," said Mr Radford who, at 74, "can't go and get another job."

"It's a matter of the big guy putting the thumb on the little guy. Our income is derived from that trust and several others. If they don't pay we're on the bones of our bum. It's not right. We're not rich."

So incensed was Mr Radford, he wrote to Craveable Brands, the parent company of 565 Red Rooster, Oporto and Chicken Treat stores.

"You have put forward not a shred of evidence that Red Rooster suffered financial hardship. You have no right to withhold rent," his letter said.

"My wife and I depend on regular payments from the trust to pay for essentials such as fuel and groceries. We do not ask for payments from the taxpayer to support our modest lifestyle."

Red Rooster said it holds leases over 70 per cent of the 350 restaurants run by its franchisees. Three quarters of those have paid rent in full. The company said it cut executive salaries as a result of the pandemic.

"For the remaining 15 per cent of sites there has been a significant decline in sales .. we have been paying proportional rent as per the code set out by the federal government," the company said.

Both Sussan Group and Craveable Brands intend to pay the equivalent of 8 per cent of gross sales instead of fixed rent.

"As a discretionary women's fashion retailer, our business has been and continues to be severely impacted by the COVID-19 pandemic," Ms Milgrom wrote to landlords.

"We will not be paying any monies under the lease or any ancillary agreements .. for April and May when we have been forced to shut our stores and have therefore receive (sic) no benefit under the lease," she said.

Sussan Group will "trial" reopening stores until January next year under the new lease arrangement.

"We trust that you will understand that a temporary percentage rent mechanism is the only way to ensure that our business can survive this period of extreme economic turmoil and remain viable," the letter to landlords said.