The Scentre Group (ASX: SCG) share price currently trades at more than a 40% discount to its pre-COVID levels. Lockdown measures took a serious toll on retail real estate investment trusts (REITs) like Scentre and Vicinity Centres (ASX: VCX) with factors such as rental disputes and the need to take on more debt weighing heavily on share prices. Could the Scentre Group's Q3 operational update provide investors with the confidence that retail REITs are getting back on track?
Scentre Group operational update
Scentre Group today announced that all 42 Westfield Living Centres continue to remain open and trading with the highest level of health and safety standards implemented. 92% of its retailers' stores are now open and trading (including in Victoria), with more stores in Victoria expected to reopen over the coming weeks. Customer visits during the September 2020 quarter were 90% of the same time last year across the portfolio (excluding Victoria).
The company's portfolio occupancy was 98.4% at the end of September 2020. The group has reached agreements regarding COVID arrangements with a total of 3,187 retailers, representing 89% of the 3,600 retail brands in its portfolio.
Scentre Group has experienced a rapid improvement in its gross rent cash collections for the quarter. Monthly gross rental billings hit a trough back in April and May, falling as much as 28% and 35% respectively. For the September quarter, monthly gross rental billings averaged 85% or $542 million, while October currently sits at 96% or $203 million.
In terms of retailer in-store sales growth, comparable like-for-like specialty in-store sales (excluding Victoria) were down 1.9% for the September quarter while comparable majors in-store sales were up 1.0%.
Scentre Group share price higher on update
At the time of writing, the Scentre Group share price is today trading 2.15% higher at $2.38 following the company's operational update. Investors are clearly encouraged by seeing the company's operational metrics recover closer to their pre-COVID levels. Scentre also announced that it has the intention, subject to unforeseen circumstances, to pay a dividend in early 2021 from surplus net operating cash flows received in 2020.
