David Jones, a major Australian department store, has entered voluntary administration. This decision puts over 6,000 jobs at risk. The retailer's board appointed administrators from McGrathNicol on Thursday. This follows years of big losses and failed talks with its landlord, Scentre Group, which owns Westfield. FTI Consulting has been appointed as receivers. They will manage operations while looking for new capital for the struggling business.
Impact on Starhill Global Reit
Starhill Global Real Estate Investment Trust (Starhill Global Reit) announced it could face a big hit to its distribution per unit (DPU) because of David Jones's administration. The retailer occupies 95.1% of the David Jones Building in Perth. This contributes about S$9 million annually, or 4.7% of Starhill's total revenue. If the lease ends without a replacement tenant, the DPU for FY2025/26 could drop by about 10.6%. It could fall from S$0.0368 to S$0.0329. Starhill Global Reit is considering distributing gains from recent property sales to help offset this impact.
Store Closures Expected
The administration process is likely to lead to immediate store closures. This is especially true in outer-suburban and regional areas. However, flagship stores in central business districts may stay open. Analysts predict that unsecured creditors, including unpaid suppliers and customers with gift vouchers, will face big losses. David Jones has a long history, operating for 188 years and undergoing various ownership changes. However, this is its first time in administration.
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The administration of David Jones could hurt retail sectors and real estate investment trusts linked to the retailer. Starhill Global Reit may see a decline in its DPU and occupancy rates. This could affect investor sentiment in the retail property market.
Investors will watch for updates on store closures and restructuring plans from the appointed receivers. They will also look for any potential impact on Starhill Global Reit’s financials.
Based on reporting by: businesstimes.com.sg, theguardian.com