Flagship David Jones stores could be sold

The company’s South African owners have tapped investment bank UBS for advice on its property holdings and offloading the two crown jewels could be the best way of saving the department store.

The pair of properties, worth about $1 billion, are the pick of both cities, notwithstanding the dire situation of the blue chip retailer. A refurbishment of the Elizabeth Street store in Sydney is all but complete and Melbourne is to be revamped next, making them attractive to premium buyers, although markets are frozen for now.

Only stores at the premium end of the market are expected to be winners in the post-virus environment, with both leveraged to the short-term return to the office and, longer term, high-spending Asian tourists.

Owning the properties could prove the difference between David Jones and Myer, which does not have rock-solid assets it can sell off to pay off debt and modernise its stores. David Jones’s move to buy its city properties back from a Deutsche Bank structure in 2006 may prove decisive.

In better times the properties would be marked “never to be sold” but even now potential buyers will have to pay up for a look at the prized David Jones assets. An immediate sale is unlikely as trading must settle after a recovery and investment bank UBS will undertake a review of the capital structure, including borrowings to ensure more sustainable arrangements.

David Jones also signalled it would take the fight to its landlords, seeking arrangements where it will likely exit unprofitable space and make the best of its premium areas.

Westfield owner Scentre and rival Vicinity Centres will be in its sights, with Woolworths saying discussions with Australasian landlords are under way in relation to an accelerated restructure.

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