South African department store chain Woolworths Holdings has sold the David Jones menswear store on Melbourne’s famed Bourke Street mall.
South African department store chain Woolworths Holdings has sold the David Jones menswear store on Melbourne’s famed Bourke Street mall to funds manager Newmarket Capital in a $121m deal that could bolster the beaten-down sector.
City retailers have been battered by the lockdown in the Victorian capital and are struggling nationally as workers make a slow return to offices, with smaller businesses demanding rent relief and larger chains in dispute with landlords.
The coronavirus crisis has also shaken confidence in city retailer property, which has been pursued by big players including Scentre Group, owner of the local Westfield empire and which has a flagship store in Sydney. Vicinity Centres also has a heavy exposure to city assets, including Emporium Melbourne and Sydney’s Queen Victoria Building.
The shake-up has seen a new breed of buyers emerge who are willing to pour capital into ageing buildings, punting on hefty returns from luxury goods in a recovery.
Newmark’s purchase of the store at 299 Bourke Street is part of the trend.
CBRE’s Simon Rooney, head of retail capital markets, Pacific, negotiated the sale, alongside JACX Property, and said it was one of the most competitive retail campaigns for an asset of its size.
The property sold on a short leaseback to David Jones of about three years, giving Newmark the chance to work up development plans.
Newmark has effectively secured vacant possession and is already dealing with interest from major fashion houses interested in anchoring a repositioned complex that is to include loft-style offices.
The process drew 15 bids from local and offshore investors, wealthy buyers, developers and syndicates.
Rooney says buyer interest has been underpinned by ongoing investor confidence in Melbourne, notwithstanding its present conditions. “We expect investors to continue to seek strategic, high-quality core investment opportunities that offer attractive return parameters in the current market and into the future,” Mr Rooney said.
David Jones chief executive Ian Moir said the sale would allow the company to focus on optimising its larger 310 Bourke Street store, while simultaneously paying down debt.
“The redeveloped 310 Bourke Street will be specially curated for our Melbourne customers with an emphasis on premium luxury and lifestyle brands across each of our categories,” Mr Moir said.
Newmark’s Simon Morris said the purchase of 299 Bourke Street highlighted the firm’s focus on building quality assets. It also owns the Jam Factory and Como Centre in Melbourne.
“We continue to acquire strategically positioned properties which offer unique investment opportunities for our investors,” Mr Morris said.
Others are picking up on the city retail theme. Funds manger Vantage, with the backing of Credit Suisse, is buying the St Collins Lane development from JPMorgan Asset Management.
While the price will be at a discount to JPMorgan’s $247m purchase price, the funds group is expected to overhaul the asset to drive returns.
Funds manager Fortius has also launched a trust to buy Adelaide’s premier retail centre, Rundle Place, which it is picking up from Blackstone for about $210m. It said the building could be leased up to generate 18% returns.
