David Jones’ flagship Sydney CBD store sold for $510 million

The David Jones flagship Elizabeth Street store in Sydney’s CBD has been sold for $510 million to property group Charter Hall.

David Jones will continue to occupy the iconic 12-level department store under the sale and leaseback agreement.

A consortium of Charter Hall Group managed funds and partnerships acquired the 3530sqm site, which has frontages to Elizabeth, Castlereagh and Market streets.

It was a unique opportunity to secure an iconic property on a large freehold site in the centre of the Sydney CBD with a triple-net, 20-year lease, Charter Hall Long WALE REIT fund manager Avi Anger said.

“Properties like this rarely come to market,” Mr Anger said on Tuesday.

“The location of this property in the Sydney CBD is unique; with three prominent CBD street frontages, close to major Sydney transport links and benefitting from views over Hyde Park and Sydney Harbour.

“This acquisition extends our focus on ‘land rich’ investments where the market rent and value of the real estate provide long-term growth prospects for our investors.”

The consortium comprises a 50% interest held by the CLW REIT, a 25% interest by the Charter Hall DVP partnership and 25% held by the Charter Hall Group.

David Jones, whose sales have been impacted by the COVID-19 pandemic and lockdowns, completed a significant redevelopment of the Sydney flagship store at 86-108 Castlereagh Street earlier this year.

David Jones and its South African-based parent company Woolworths Holdings Ltd entered exclusive talks with Charter Hall about the Elizabeth Street property in October.

Woolworths Holdings began looking at selling the David Jones flagship stores in the Melbourne and Sydney CBDs in May as part of a review of the capital structure of its Australian entities, David Jones and Country Road Group.

Woolworths Holdings said it was making steady progress in the ongoing review, as it announced the $510 million sale of the Sydney flagship store.

“The board of directors of WHL believes that the proposed transaction will further strengthen the David Jones balance sheet and support the repositioning of the business to deliver shareholder value,” Woolworths Holdings said.

The David Jones menswear store in Melbourne’s Bourke Street Mall was sold for $121 million in July to Australian-based investor Newmark Capital. At the time, David Jones said the menswear store sale would allow the retailer to focus on its larger Bourke Street store, which was being redeveloped.

Charter Hall said the Elizabeth Street store sale and leaseback transaction involved a 20-year, triple net lease, with minimum 2.5% per annum annual rent increases supplemented by an agreed turnover rent linked to sales performance.

The lease agreement included five options to renew the lease, each for a further term of 10 years, Woolworths Holdings said.

The $510 million purchase price reflected a 5% initial yield based on the initial annual net rent of $25.5 million, Charter Hall said.

Settlement is conditional upon approval from the Foreign Investment Review Board for David Jones’ entry into the lease.