Gambling giant Tabcorp seeks rent relief
Leaked documents reveal betting giant Tabcorp is asking for a six-month rent holiday from its commercial landlords after the Covid-19 lockdown forced the temporary closure of its 4500 physical betting outlets.
Correspondence from Tabcorp to 374 commercial landlords, obtained by The Saturday Paper, says the business is experiencing significant disruption due to “unforeseen and extenuating circumstances that have arisen in light of the Covid-19 pandemic”.
In the letter, Tabcorp “respectfully” requests a six-month suspension of rent and outgoings from April 1 to September 30.
The relief would give the company “much needed relief and capital to enable the business … to be relaunched once consumer confidence has been restored”.
If granted full rent suspension at all its 374 retail outlets Tabcorp could save an estimated $20 million. The remaining 4000-odd betting booths are inside pubs and clubs.
However, as Tabcorp and others in the gambling industry try to ride out the crisis, experts fear a boom in online betting will soon strike with millions of Australians in lockdown.
Monash University gambling expert Charles Livingstone says psychosocial stress from the coronavirus crisis could be a driver of high-risk and addictive gambling.
While poker machine operators will lose an estimated $7.5 billion revenue if pubs and clubs are shut for six months, Associate Professor Livingstone expects at least some of that revenue to migrate online. He predicts Tabcorp will be looking to build its online business during the crisis and is expecting some aggressive marketing tactics – noting that the online gambling industry is already the third or fourth biggest buyer of broadcast television advertisements.
“The reality is they will have a steady cash flow from online gambling, they will push that market up as hard as they can, they’ll try to recruit new punters,” he said.
It’s been a bruising start to the year for Tabcorp. Since mid-February, its share price has been tanking, down about 40 per cent from this time last year as the company reels from the suspension of sporting codes in Australia and around the world in the wake of the coronavirus outbreak.
The decline began just days after Tabcorp announced that its total revenue had climbed 4.4 per cent to $2.91 billion in the six months to December 31, 2019.
In March, the company still paid out an interim dividend of 11 cents a share to its investors, fully franked.
Then, on Tuesday this week, Tabcorp announced it would stand down more than 700 employees until the end of June, as well as 160 technology contractors.
The news came on the same day Prime Minister Scott Morrison announced a new mandatory code for commercial leases, which applies to small to medium business tenants with a turnover of less than $50 million.
Under the scheme, landlords will have to reduce commercial rents in line with a company’s falling revenue and must not evict their tenants. For their part, tenants must not break the lease. The code encourages negotiating in good faith and, if parties can’t agree, requires both to attend binding mediation.
As the $50 million yearly turnover threshold applies to retail corporate groups at the group level, rather than to individual retail outlets, Tabcorp doesn’t fall within this code.
Other major corporations trying to play hardball with landlords – such as retailer Solomon Lew’s Premier Investments, which announced it would shut more than 850 stores and refuse to pay rent during the crisis – will also not be covered.
However, the prime minister has said the principles of the code “apply in spirit” to all affected businesses.
Tabcorp’s earning mix is 50 per cent from lotteries and Keno, 39 per cent from wagering media and 11 per cent from gaming services.
In its half-yearly profit results the lottery and Keno division shone with a 12.4 per cent lift in revenue to $1.58 billion. A record $150 million Powerball jackpot helped attract 300,000 extra players.
Meanwhile, in the wagering and media business – which offers totalisator and fixed-odds betting on racing, sports and other events and has three Sky Racing television channels – revenue dropped 3.7 per cent to $1.18 billion because of a softening of discretionary spending.
The gaming services business – which monitors electronic gaming machines and offers gaming machine and systems supply – was already struggling in the first half and revenue dipped 4.4 per cent to $149 million. This part of the business is also expected to take a coronavirus hit because pokies venues are closed.
Sydney commercial property landlord Con Loupis has dozens of leases and TAB is one of his tenants at a property in Marrickville.
Tabcorp has asked him to forgo about $75,000 rent over six months.
“They are taking the piss out of us,” Loupis told The Saturday Paper.
He said he’s been happy to grant rent relief to small business tenants but is struggling to muster sympathy for Tabcorp, which has a market capitalisation of about $5.5 billion.
“I’m down 55 per cent rent on my leases and I’m giving a lot of free rent because hairdressers are closed,” Loupis said. “I’m doing my best to save my lessees so they can be there for the future … If they go broke, I’ll have more vacancies.”
The Saturday Paper also understands that among those Tabcorp is asking for rent relief is a couple in their 80s who are self-funded retirees. The rent from their lease with TAB is their only income and the value of the couple’s property makes them ineligible for the pension.
A Tabcorp spokesman said the company would not comment publicly on its commercial arrangements but insisted it was happy to discuss alternative options with landlords if their current commercial circumstances were also challenged.
“We remain committed to working proactively and collaboratively with all our stakeholders so that we can collectively emerge from the Covid-19 period as strongly as possible,” the spokesman said.
Independent federal MP Andrew Wilkie, a long-time gambling reform campaigner, questioned whether the wagering giant has moral standing to claim compassionate treatment.
“It’s ludicrous for Tabcorp to be crying poor and expecting their rents to be suspended,” he told The Saturday Paper. “This is a company that has billions of dollars in revenue and net assets. It’s not a company that needs or deserves to have its rents waived. This is a company that has contributed to so many suicides, so many broken homes and so much domestic violence.”
The Tabcorp spokesman insisted the company was doing enough to tackle problem gambling.
“The vast majority of people enjoy gambling responsibly and we support their freedom to make their own choices. For some people, gambling can become a problem and we have a range of tools to support customers, including bet limits, deposit limits and a ‘take a break’ function, which allows customers to suspend accounts, all the way through to self-exclusion and Tabcorp-initiated exclusion,” the spokesman said.
Anti-gambling advocate Tim Costello said that while Tabcorp’s employees deserve support through the JobKeeper program, he thinks the company’s plea for commercial rent relief is “a bit rich”.
“There’s no question, if you’ve got an addiction, it doesn’t stop whether there’s a shutdown or a lockdown. That’s why the advertising has gone off the Richter scale for online gambling,” he said.
“Everyone needs to share the pain equally. If they are still making a return, that should be subsidising the rest of [the business].”
In its coronavirus update to investors, released this week, Tabcorp said it cannot reliably quantify the effect the virus will have on overall earnings and cannot provide specific guidance on the financial impact in the 2020 and 2021 financial years.
For the time being, horseracing, greyhound racing and harness racing events are still running, except in Tasmania, and newsagencies are still selling lottery tickets.
However, J.P. Morgan equity analysis is predicting close to a 20 per cent decrease to total Tabcorp wagering turnover for the 2020 financial year.
Tabcorp’s chief executive, David Attenborough, who was due to pocket close to $2 million in fees and salary from the 2019 financial year, is set to take a 20 per cent cut to his fixed remuneration until the end of June. Chair Paula Dwyer and board members will take a 10 per cent fee cut.
For his part, Associate Professor Livingstone fears that financial changes designed to keep the economy going during the Covid-19 lockdown, including people being allowed to withdraw $20,000 from super accounts over this and the next financial year, may prove damaging for some, particularly those who struggle with a gambling addiction.
Livingstone notes that the Australian Banking Association late last year called for submissions on restricting the use of credit cards in online gambling.
He said online gambling expenditure appears to be up by 67 per cent in the past week and if that trend continues it could mean an extra $2 billion in personal losses over the year.
“Online gambling is unlimited,” he said. “You can bet as much as you like, whereas the pokies at least have some limitations and you can’t get access to credit card funds [inside clubs]. Most online gamblers load up their accounts with credit cards and that’s a big risk.”
This article was first published in the print edition of The Saturday Paper on Apr 11, 2020 as "Gambling on concessions".
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