Scentre Group shares (ASX: SCG) have come under fresh pressure to start the week, down 4.43% to A$3.45 following a downgrade by Morgan Stanley and the insolvency of anchor tenant David Jones. This brings the stock’s YTD decline to 18.44%, a significant underperformance to the broader market, with the ASX 200 up 3.46% since the turn of 2026.
The SCG share price gapped down from A$3.61 to A$3.50 at the open, and then sold off further through the day, as Morgan Stanley analyst Simon Chan downgraded his rating from Overweight to Equal Weight and issued a price target of A$4.00. While the price target still implies a premium over current trading levels, the downgrade to neutral signals that the analyst no longer sees significant upside potential in the near term.
Pressures Build on SCG
At the heart of the recent shift is the decision by David Jones’ board of directors to appoint McGrathNicol as voluntary administrator last week (Nov 5). Simultaneously, the secured lender Hilco appointed the consulting firm FTI Consulting as receiver.
The insolvency followed the breakdown of lease negotiations between David Jones and Scentre Group. The department store’s owner, the private equity firm Anchorage Capital Partners, had rejected a restructuring offer from Scentre that included rent-free periods. David Jones had demanded these concessions after a pre-tax loss of 95.5 million Australian dollars in 2025.
The financial consequences for Scentre are linked to the fact that David Jones is a tenant at 17 Westfield locations, occupying a total of approximately 200,000 square meters. The company pays Scentre roughly A$45 million in gross rent annually, whilst no rent payments have been made since September 30, 2026, meaning David Jones is officially in breach of its lease agreements.
Top Australian Brokers
- Pepperstone - Top Australian broker - Read our review
- eToro - Invest in ASX and international shares - Read our review
As a short-term buffer, Scentre has bank guarantees of approximately A$30 million, an amount equivalent to roughly eight months’ gross rent, which was required as security when Anchorage Capital Partners acquired David Jones in 2023. These guarantees can be used to cover outstanding rent payments while the administrators review the continued operation of the property.
Morgan Stanley Downgrade
Analyst Simon Chan of Morgan Stanley explained the downgrade by citing medium- to long-term risks that extend beyond the immediate liquidity buffer.
While bank guarantees offer short-term protection, the real challenge lies in re-leasing large anchor spaces, which are difficult to lease to other tenants due to their size and specific construction. Potential store closures, lengthy renovations, and significant capital expenditures for redesigning the affected locations could weigh on results in the coming quarters.
Furthermore, Scentre Group’s 2026 annual forecasts were published before David Jones filed for bankruptcy protection, increasing the risk of a negative adjustment to earnings and dividend guidance.
What Next?
Prior to the latest move, Scentre Group shares had been testing the 200 day SMA, looking to shift trend, but that moment has passed for now at least. The close at A$3.45 saw the stock price fall through both the 50 day and 30 day SMAs on the day, shifting near term momentum to the downside.
Re-leasing a total of 200,000 square meters, spread across 17 locations, requires both time, and favourable market conditions. It has not reached the point yet where stores are being given up, but the market is clearly looking through to the possibility.
