David Jones closes in on $120m Melbourne CBD sale

The deal is one of a series of commercial property transactions that are going ahead even as vendors defer their plans and some buyers retreat. But select transactions are closing as buyers move in early or complete those that were already in the works.

The Melbourne DJs store is one of the country’s best properties. The building’s position at 299 Bourke Street means it is primed for repositioning even as the coronavirus scare rips through retail with a luxury play likely once conditions settle down.

David Jones will pour funds from the sale into giving its sister store across the mall a significant makeover once the crisis has passed.

The 181-year-old retailer declined to comment on sales talks but has said it wants to make its premier trading site at 310 Bourke Street an “elevated retail destination”. Before the crisis struck, David Jones said it would start on the refurbishment and optimisation of the remaining store in January next year.

The property sits in a 22,000sqm site and is being offered with a short-term leaseback after which the buyer would take vacant possession of the building.

CBRE’s Mark Wizel and Simon Rooney are marketing the property with Michael Jackson, director of JACX property, providing transaction management. They did not return calls.

Prospective buyer Newmark is one of the savviest property players in Melbourne and targets what it terms generational assets. Its holdings include Melbourne’s Jam Factory and the nearby Como Centre, as well as hardware and neighbourhood shopping centres set for redevelopment.

The group, run by former AFL commissioner Chris Langford and business partner Simon T. Morris, brings a deep knowledge of retail, but did not comment on the property, saying it was focused on its existing assets.

“We have got a high-quality institutional grade property portfolio and that is our core focus and that’s where we are spending and dedicating our resources and time,” Mr Morris said.

“We always look at opportunities and will continue to do so in the normal course of business.”

In another blue-chip property deal, Macau casino baron Loi Keong Kuong finalised a deal to buy the Gold Coast’s Circle on Cavill retail centre from local funds manager EG for $61.8m.

The site in the heart of Surfers Paradise was marketed last year by JLL and McVay Real Estate, with the sale a pointer to how the best assets can still change hands despite the difficult market.

“We are very pleased with this result and also to see evidence that transactions of high-quality real estate are still completing in this cautionary environment,” EG fund manager Daniel Farley said.

Though the David Jones sale is still under negotiation, a move could signal the beginning of a ­series of transactions that will see more private players swoop on buildings that listed trusts or under-pressure retailers are looking to offload.

The office market is also showing signs of life with Flight Centre quietly offering its building on Melbourne’s St Kilda Road for sale as it looks to trim back the amount of equity it may raise via a rescue plan.

It also shows that deals are still going on despite a wave of property transactions either being put on hold or being cancelled. The first quarter of commercial property is relatively quiet but efforts to sell office towers in major capitals kicked off before the coronavirus struck.

Some are still going, with ESR’s building in Brisbane’s Ann Street attracting five shortlisted bidders and another building near Sydney’s Circular Quay also being ­offered by AEW with bids closing on Thursday.

Meanwhile, the David Jones building could be cleanly repositioned or redeveloped to benefit from an upswing in coming years, with luxury tenants still keen for a presence.

South Africa’s Woolworths Holdings last week closed its local small-format retail stores but its strategy to sell off unwanted city stores and focus on flagship outlets repeats a strategy already used in Sydney.

The company sold its “men’s store” Market Street property in Sydney to Westfield owner ­Scentre and Cbus Property for $360m in 2016 and has since poured some of the proceeds into a $200 million overhaul of its primary Elizabeth Street property.

This article originally appeared on www.theaustralian.com.au/property.