Retail chief Paul Zahra fears impact of rent row, amid Scentre mall lockout

Retail chief Paul Zahra is worried about rising tensions between mall landlords and tenants ahead of the crucial Christmas season.

Noni B stores are part of the Mosaic Brands portfolio hit by the rent dispute.

Australian Retailers Association boss Paul Zahra is concerned shopping centre owner Scentre Group’s unilateral move to lock Mosaic Brands out of 129 of its stores over a rent dispute will ratchet up tensions between landlords and tenants ahead of the crucial Christmas period.

Mr Zahra, a former chief executive of up-market department store David Jones, also told The Australian recent ARA research showed around 60 per cent of its retailers are continuing to negotiate for some form of rental relief from landlords.

“The ARA is concerned about rising tensions between landlords and retail tenants in the current economic environment,” he said.

“While we can’t comment on these particular circumstances, any tenant lockouts send a worrying signal to the market and to other tenants who may be in protracted negotiations.”

Scentre Group, the landlord which owns local Westfield shopping centres, on Thursday locked Mosaic Brands, owner of the Noni B, Millers, Rivers, Katies, Crossroads and EziBuy brands, out of its stores amid a long-running rent dispute sparked by the COVID-19 shutdowns.

It is the first such action by a landlord against a large national retailer as parties haggle over rents during lockdowns and the COVID-19 downturn.

Peak body ARA is working with its members, landlords and government to find a solution, but there is concern Scentre’s action could scuttle the process and create even more uncertainty only a few months out from Christmas.

“Certainty is critical at the moment,’’ Mr Zahra said.

“Through no fault of their own, many retailers remain in an extremely vulnerable position – particularly those in discretionary retail categories such as fashion and personal accessories as well as those trading in CBD or tourist locations.

“This is not only financially stressful, but the uncertainty of protracted rental negotiations have a heavy toll on the mental health of retailers.

“We need to do all that we can to alleviate some of that uncertainty and place retailers in a more robust position to maximise their trading position in the final quarter of this year as we approach the critical Christmas trading period.”

Paul Zahra. Picture: Gaye Gerard

Mr Zahra would not comment directly on the actions of Scentre Group, but said the ARA would expect all landlords to operate according to the spirit of the national leasing code of conduct, regardless of sales turnover.

“We certainly believe that landlords and retailers will be watching this space in a very focused way.

“Our focus at this time is with government at state and federal level to call for an extension of current measures which protect retail tenants that remain in a vulnerable position.

“We have been strongly calling for an extension to the national leasing code of conduct which is set to expire in most states in September. We were pleased to see this extended in Victoria yesterday, with some provision for landlord relief alongside this.”

An extension of the leasing code is being considered by federal cabinet, which is under pressure from retailers who have warned of more store closures unless they can access further rental relief and job support packages are extended. The commercial tenancy code is not on the agenda for national cabinet on Friday but could be raised by state governments.

A Scentre Group spokeswoman declined to comment on the specifics of the dispute. “We work with each of our retail partners on a case-by-case basis. We don’t comment on commercial arrangements with our retail partners,” the landlord said in a statement.

Retail leasing executives are reluctant to speak on the record as Scentre Group is the dominant retail landlord in Australia, but one said the move was “pretty abnormal in the current environment”.

Rival landlords Vicinity Centres, co-owner of the Chadstone shopping centre in Melbourne, has not imposed tenant lockouts, even though it disclosed low rates of rental collection and hefty rent waivers in its results this week.

The Shopping Centre Council of Australia, which represents major shopping centre landlords, said it did not comment on “commercial matters” between retailers and shopping centre owners.

“Since the emergence of the COVID-19 pandemic, shopping centre owners have provided $1.6bn in rental assistance to small and medium sized retailers and continue to engage in individual conversations with thousands of retailers nationwide on a case-by-case basis,” the SCCA said in a statement.

“As a principle the Council stands by the right of its members to have the terms of tenancy agreements honoured, in good faith, while acting to protect their commercial, financial and stakeholder interests,” the SCCA said.