$300m buffer protects landlords from store closures

RETAIL landlords are confident they can relet any Dick Smith stores that may be closed because of the sale of the business by Woolworths.

RETAIL landlords are confident they can relet any Dick Smith stores that may be closed because of the sale of the business by Woolworths.

But to offset any legal action from the landlords, Woolworths has allocated $300 million for the payment of rent on stores that close.

Real estate broking analysts said the closure of up to 100 Dick Smith stores would have a minimal impact on landlords because the leases are all long term and, if terminated early, landlords would have to be paid out.

The largest landlord is Westfield, which leases 31 Dick Smith outlets. The rest are spread across centres owned by Stockland, AMP Shopping Centres, the GPT Group and CFS Retail.

While some stores are in shopping centres, there are many smaller, free-standing outlets that may be closed when the leases expire in the medium term.

A Stockland spokesperson said: "There is no news from Woolworths on their specific plans as yet, however, should any Dick Smith stores in our centres be affected, we will work with the owner to ensure leasing obligations are met and a smooth transition is made to new tenants."

Retail analysts said despite the parlous state of the retail sector, they were confident the spaces could be sublet.

Simon Wheatley, the executive director of real estate investment research at Goldman Sachs, said there would be some vacancies over time but any financial impact would be offset by lease termination agreements.

"The long-term nature of these leases means that if any store is closed, the landlord will still receive rent and that will cushion the impact of having an empty store," Mr Wheatley said.

The past year has seen other store closures, such as Borders book stores, but almost all of the spaces have been re-leased, Mr Wheatley added.

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