Australia’s biggest pharmacy chains Chemist Warehouse and Priceline have stunned their landlords by proposing massive rent reductions despite being one of the few retail groups to trade strongly during the pandemic, in part due to panic-buying of medicines.
Veteran Ray White leasing agent Anthony Harris said landlords were keen to help genuinely affected retailers, but said groups like Priceline and Chemist Warehouse were “taking the piss out of the system”.
Emails sent out by Chemist Warehouse Leasing Services on April 8 – a day after prime minister Scott Morrison unveiled the new code of conduct for commercial tenancies – proposed a halving of the rent payable for April, May and June with 25 per cent waived and 25 per cent deferred until after the pandemic.
The form letters, seen by The Australian Financial Review, further propose that rent be paid “on the last day of each month moving forward” rather than at the beginning of the month.
“The letter purports to invoke the spirit of the national code of conduct and to ask for a 50 per cent reduction in rent but without any providing any transparent information regarding the purported reduction in turnover,” said the landlord of a Chemist Warehouse in Mornington.
“I strongly doubt Chemist Warehouse Mornington has suffered a 50 per cent reduction in turnover.”
Ray White’s Mr Harris said he had heard from multiple Priceline landlords that their tenant, which is a subsidiary of ASX-listed Australian Pharmaceutical Industries, had withheld rent in April and sought rent relief.
“My understanding is Priceline is trading really well so why withhold rent?” Mr Harris said.
API operates 488 Priceline pharmacies, while My Chemist Retail Group operates more than 400 Chemist Warehouse and My Chemist stores.
Controlled by Financial Review Rich Listers Mario Verrocchi and Jack Gance, My Chemist Retail Group turns over about $4 billion a year and is eyeing up a revived $10 billion IPO.
The Chemist Warehouse emails stated the business had experienced “significantly reduced trade to date” without including any specific turnover data.
“[We] expect that our business will see a further downturn in the coming days, weeks and months.”
Less than a month ago, Chemist Warehouse group director Mario Tascone told The Sydney Morning Herald he wished he had a “magic warehouse full of Panadol”, such was the demand at the time.
When asked about its rent relief emails, Chemist Warehouse national property director John Pamouktsis said, “I don’t know what you are talking about” before hanging up the phone on the Financial Review.
The landlord of the Chemist Warehouse in Mornington said of $14,300 in rent was due on April 1 but had not been paid.
“The agent has been chasing up Chemist Warehouse accounts every day for the past week but no one returned her calls,” he said.
However, following requests for comment from the Financial Review, Chemist Warehouse CEO Sam Gance apologised to the Mornington landlord for sending them “the standard corona letter”.
“The Mornington store is thankfully only suffering a 7 per cent downturn in sales. As discussed, we shall immediately pay you the April rent shortfall,” Mr Gance wrote in an email.
“In future, monthly rental payments will be made in accordance with our lease.”
A spokesman for API, which reports its half-year results on Thursday, said it was having “constructive discussions with landlords”.
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