Sonic’s message on rent cuts at odds with GPs’ experience

3 minute read

Despite a statement to the contrary, GP clinics have been asked for substantial rent reductions from pathology labs owned by Sonic Healthcare

Pathology giant Sonic Healthcare, which initially denied asking for substantial rent reductions from its GP landlords, is now backtracking on that position amid claims from GPs that contradict Sonic’s assertion.

GPs have contacted The Medical Republic asking us to correct Sonic Pathology’s statement that it had not requested rent reductions from some GP landlords.

These GPs have chosen to remain anonymous and requested their stories be de-identified due to the sensitivities of rental negotiations.

The GPs have told The Medical Republic that regional managers for pathology labs owned by Sonic Pathology, a subsidiary of Sonic Healthcare, made phone calls several weeks ago requesting rent reductions of 50% or more.

One GP clinic deferred making a decision on the demand and subsequently did not offer a rent cut to the pathology lab following legal advice on the matter.

Another GP clinic told the Sonic representative it was willing to negotiate a substantial rent decrease, so long as that drop in rent was proportional to the revenue loss of the pathology lab.

That clinic expected negotiations to continue and was shocked to discover the Sonic-owned pathology lab had started paying substantially less rent without any further communications or a written agreement.

Dr Ian Clark, the CEO of Sonic Pathology, provided a statement to The Medical Republic, which was published on 4 May. The statement read: “While Sonic Healthcare has requested rent reductions from some commercial (non-GP) landlords, the Sonic Pathology arm of the business has not.”

Following the revelation that some GPs were in fact being asked for rent reductions of 50% or more, Dr Clark provided this statement by email on 6 May: “We are always in contact with our landlords. Rents are discussed frequently and do change from time to time. As always, during the COVID-19 pandemic, changes to rent may occur and are based on individual circumstances. These are private negotiations undertaken in good faith and require agreement of both parties.”

Sonic Healthcare is an ASX-listed company with a market capitalisation of around $12 billion.

IPN Medical Centres, which is also owned by Sonic Healthcare, has been asking for rent reductions, but, until now, it had been unclear whether Sonic Pathology was seeking rent relief as well.

GP landlords are also a confused as to why Sonic Healthcare needs to seek rent cuts when the listed company is putting on such a brave face in statements to the Australian Stock Exchange.

In an ASX announcement on 20 March, Sonic Healthcare said its “balance sheet is in a strong position, and the company has almost $1 billion of cash and committed credit facilities currently available”.
Pathology labs owned by another listed company, Healius, have also been asking for rent reductions of 50% from GP landlords.

A survey of 161 Medical Republic readers (who are mostly GPs) revealed that almost half had been asked for a 30 to 60% rent reduction, and that 14% of survey respondents had been asked for more than a 60% rent reduction.


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