Pat Barrett | Nov 20, 2017 07:29
Originally published by Cuffelinks
A recent Bank of America Merrill Lynch (NYSE:BAC) listed property (AREIT) conference in Sydney brought many offshore investors together to meet the AREIT CEOs and management teams. Panels discussed topics including how to keep shopping malls relevant, the strength of the Sydney commercial market, policy impacts upon the residential sector and capital flows. Meanwhile, Myer released its revised strategy, offering insights into the department store sector. The key points that I took from these updates included:
h2 Retail/h2Myer (AX:MYR) released its strategy update, recalibrating its prior sales targets due to retail sales growth slowing and declining footfalls in malls. In relation to AREITs, they will have reduced their footprint (m2) by 10% in FY18, having already closed three stores and handing back space in four stores, with an additional three store closures to occur (Hornsby, Belconnen and Colonnades). Myer acknowledged it was a tough retail environment but still have growth targets (revised down).
There have been some bad news stories out of the US with JC Penney the latest to struggle but Myer tried to quell the pain by highlighting that Australia has less department store space per person than in other developed countries, plus we have population growth. AREITs have been dealing with this issue for over a decade, with most malls reducing their exposure to department stores. However, the long-term contractual leases in place mean that Myer is liable to pay rents for many years to come.
Pat Barrett is a Property Analyst at .
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