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Isetan not renewing lease of 'loss-making' Westgate store

ISETAN Singapore will not renew its lease with JG Trustee (JGT) for its "loss-making" store in Westgate, the Japanese department store operator said in a regulatory filing on Monday before the market opened. 

According to terms of the lease, the company has the option to renew the lease for a period of three years by notifying JGT no later than six months prior to the expiry of the lease on Dec 22, 2019. 

Isetan Singapore noted that it has had discussions with JGT on the lease renewal, but that both parties did not reach an agreement. Therefore, the company has decided not to renew the lease, which will expire in December this year. 

"The rationale for the company’s decision not to renew the lease is due to both parties not being able to reach an agreement on the renewal terms of the lease favourable to this loss-making store," Isetan Singapore said. 

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It added that the financial effect on the non-renewal of the lease for the current and future financial years "cannot be reasonably estimated" as at the date of this announcement. 

"The decision not to renew the lease is part of the company’s ongoing exercise of continuous assessment, realignment and consolidation of its operations to enable better deployment of existing resources among its other business units," Isetan Singapore added. 

Isetan Singapore has a market cap of about S$128 million, and sits on bond investments worth around S$68.5 million, as well as S$50.7 million in cash.

Westgate is fully owned by CapitaLand Mall Trust, which previously named Isetan as a key mall tenant by gross rental income, alongside BreadTalk, Fitness First, Spotlight and Samsung.

Sabrina Lai, centre manager for Westgate, confirmed in a statement that Isetan will not renew its lease but added that “we are committed to curating a good retail mix to enhance shoppers' experience at Westgate”.

“As part of our ongoing tenant renewal process, the lease expiry is an opportunity for Westgate to refresh our retail offerings and to strengthen shopper engagement as a lifestyle and family mall,” she said, in response to press queries. “We are in advanced negotiations with several prospects and exploring several options for the use of the space.”

Isetan Singapore closed up by S$0.08, or 2.58 per cent, at S$3.18 on Monday, after the news, while CapitaMall Trust shed S$0.01, or 0.41 per cent, to S$2.43.