This article is from the Australian Property Journal archive
NEWMARK Capital has been confirmed as the buyer of the David Jones menswear store in Melbourne’s Bourke St Mall, in a $121 million deal with the struggling department chain that will fund the refurbishment of its larger store across the road.
David Jones’ parent company, South African based Woolworths Holdings, has engaged UBS to undertake a review of its property holdings and floorspace utilisation that could also lead to 310 Bourke St Mall and its Elizabeth St store in Sydney being divested.
Shortly before a campaign was launched for the now-sold 299 Bourke St store, Woolworths Holdings had revealed it would slash David Jones floor space by 20% by 2026, including via negotiations with landlords that could include breaking of leases.
“The divestment of 299 Bourke St Mall will allow us to focus on the optimisation of our larger 310 Bourke St store and deliver a more cohesive and elevated single store experience in Melbourne’s CBD while simultaneously paying down debt as part of our ongoing debt reduction strategy,” David Jones chief executive officer Ian Moir said, adding 310 Bourke St would have an emphasis on premium luxury and lifestyle brands across each of its categories.
In a similar move, the Elizabeth St store reopened at the end of last year after a $200 million revamp resulting from David Jones selling its menswear building at 77 Market St to Scentre Group and Cbus Property for $360 million in 2016 with intentions to overhaul the adjacent offering.
Prior to the pandemic, Woolworths Holdings had written off more than half the value of David Jones since acquiring the chain for more than $2.1 billion in 2014. In August, it wiped $437.4 million from its value, taking it down to $965 million.
CBRE’s Simon Rooney negotiated the sale of 299 Bourke St, alongside JACX Property which acted as transaction manager on behalf of David Jones.
Over 140 enquiries were fielded and 15 bids received, representing a mixture of domestic and offshore investors, high net worth individuals, developers, and syndicate investors, according to Rooney.
The property transacted with a short term leaseback to David Jones.
Rooney said Newmark Capital had been attracted by the opportunity to secure vacant possession of an iconic and landmark super prime asset post the leaseback to David Jones, enabling a re-positioning play to transform the 2,247 sqm site into a mixed-use asset with office space above retail.
Newmark Capital’s Simon Morris, who founded Newmark Capital with Chris Langford, said they continued to “acquire strategically positioned properties which offer unique investment opportunities for our investors.” Newmark Capital is also planning to redevelop the Jam Factory precinct in the inner suburb of South Yarra.
Rooney said buyer interest had been underpinned by ongoing investor confidence in Melbourne – the fastest growing capital city in Australia, which is expected to become the most populous by 2026.
“Strategic investment opportunities such as 299 Bourke St, located at the heart of Melbourne’s super prime pedestrian mall provides enormous scope and opportunity for Newmark to reposition the asset when David Jones vacate and relocate. Seldom do we get the opportunity to transact these types of investment opportunities.”
In 2000, David Jones sold three stores in Melbourne and two in Sydney to the Deutsche Retail Infrastructure Trust for $366 million, with a 79-year leaseback. Deutsche paid $244 million in cash for the property and as part of the agreement, undertook a significant $112 million refurbishment and redevelopment of the stores. However, five years into the deal David Jones decided it no longer wanted to be a tenant, and bought back the Melbourne and Sydney stores for $414 million – paying $362 million in cash and $45 million to unwind the lease agreement.
On Collins St, Vantage Property Investments has been speculated by Nina Media to be in talks to buy the St Collins Lane shopping centre for less than half of the $247 million paid by JP Morgan Asset Management for US pension giant California Public Employees’ Retirement System just four years ago.
The centre, previously a dated mall named Australia on Collins before a $30 million refurbishment, has struggled with vacancies for an extended period. By the middle of 2017 it was facing reported vacancies of around 45%. UK department store Debenhams made its Australian debut at 3,600 sqm in the centre but became a high profile casualty of the tough retail trading conditions and announced in July last year it would close the store.
