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Sydney Airport provides rent waivers for retail and property tenants

sydney international airport

Sydney Airport provided US$37.9 million worth of rent waivers to retail and property tenants from April to June, or 62% of contracted rents by value in the period (71% in retail alone).

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Discussions with partners are continuing about the period after June, with any relief to be applied in retrospect.

The figures emerged as the company reported half-year results to 30th June, with retail revenue falling by -20.1% year-on-year to US$106 million. On an adjusted basis, retail revenue was down by -44% to US$74 million inclusive of rent abatements and provisions for doubtful debts, which the airport said was “reflective of fair and equitable sharing of the pain with our tenants”.

The airport company said that a Code of Conduct framework was applied to all negotiations, adopting the principle of proportionate relief. It said that financial transparency was required from tenants before relief was granted and there had been no structural changes to contracts. Instead, temporary relief to existing contracts has been applied.

On duty free, Sydney Airport said that relief had been provided to Heinemann “in line with its contract”, adding that a replanning of the mix was underway. It also highlighted a project to enhance the International Terminal luxury precinct, with deals struck with fashion brands Moncler and Saint Laurent.

Sydney Airport said it “has worked closely with all tenants to provide fair and equitable concessions to reflect the impact of the COVID-19 pandemic. Each concession offered was assessed on a case-by-case basis and the level of relief offered was dependent upon each tenant’s individual circumstance. Sydney Airport believes that an equitable sharing of the pain with tenants at a time when they needed it the most will deliver the best long-term outcome for security holders.”

Some 30% of stores at the airport were trading in July, up from 12% in May. The occupancy rate was 97% as of 30 June.

The airport company posted total revenue of US$366 million in the half, a decrease of -35.9% compared to a year earlier. This was driven by a -56.6% fall in passenger traffic to 9.4 million. The year-on-year decline was -18% in Q1 and -96.6% in Q2.

Earnings before interest, tax, depreciation and amortisation (EBITDA) was US$215.4 million, down by -35.4% on the previous year. Net loss (after income tax) was US$38.4 million compared to a profit of US$12.4 million a year ago.

Sydney Airport also revealed a plan to raise US$1.4 billion in equity to improve its liquidity amid the uncertainty caused by COVID-19. It is also targeting at least a -35% reduction in operating costs for the 12 months from 1 April. Capital project expenditure will be further reduced, with a target range of US$71.7 to US$89.6 million for the calendar year 2021, mainly relating to critical projects.

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On the outlook, the company said: “It remains unclear how long the domestic and international travel restrictions will continue for, however while they are in place, Sydney Airport’s operations are likely to remain adversely impacted. As a result, it is anticipated that Sydney Airport’s financial performance will continue to be affected.”

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