This article is from the Australian Property Journal archive
MAJOR department store David Jones has formally launched the campaign to sell its menswear building in Melbourne, in a rare offering on the tightly held Bourke Street Mall that is expected to woo domestic and international capital despite challenges in the retail sector.
The sale was flagged by South African owners Woolworths Holdings last month and comes after the luxury department store suffered a near $500 million loss for the 2019 financial year.
This is not the first time DJs has sold a store in Melbourne.
At the turn of the new millennium, DJs sold three stores in Melbourne and two in Sydney to the Deutsche Retail Infrastructure Trust in December 2000 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.
But five years into the long-term lease, DJs changed its mind and bought back the Melbourne and Sydney stores for $414 million – $362 million in cash and $45 million to unwind the lease agreement.
CBRE’s Mark Wizel and Simon Rooney have been appointed as exclusive marketing and sales agents with Michael Jackson, director of JACX Property, providing transaction management services on behalf of David Jones.
The agents said the menswear building at 299 Bourke St is one of the few major assets to be offered on the mall in over a decade. The retailer is offering a short-term lease back and providing interested parties with a definitive date on which they will be providing vacant possession of the building.
“Generations of Australians have a strong affinity with Bourke Street Mall and, in particular, the David Jones brand,” Wizel said. “The market will be watching with interest as to what the next chapter looks like for the David Jones menswear store, with a range of end uses possible under the current zoning and a strong backdrop of supporting economic drivers suiting retail, residential, accommodation and commercial office product.”
Rooney said assets like 299 Bourke St are always tightly held, rarely traded and highly sought after. The property, which offers an underlying land holding exceeding 2,200 sqm, is expected to attract strong interest due to the rarity of being able to secure such a prime CBD asset with future development potential.
He pointed to the adjoining property known as ‘The Walk Arcade” which recently received approval for a new development comprising a 40-metre tall building. It is set to house a new hotel and retail offering and shares a laneway with 299 Bourke St.
“The flexibility around the offering of the property will be a major draw card for both domestic and international capital, presenting a highly strategic future development and value add opportunity, which will cater to a wide variety of developers, retailers, adjoining owners and private or institutional investors with a long-term focus,” Rooney said.
299 Bourke St comprises a floor area of around 14,000 sqm and could draw the likes of major player ISPT, which already owns two assets on Bourke St – 206 Bourke St which it bought for $118.3 million three years ago, and the famed GPO Melbourne, home to H&M’s flagship store in Melbourne and a stone throw from the DJs store, which ISPT bought from Morry Schwartz and Adam Garrison for $81 million in 2005.
The property could also attract the likes of Spanish retailer Zara, currently located across the mall, to launch a new mega flagship concept store, similar to what it did with its US$324 million purchase of the former NBA store 666 Fifth Avenue in Manhattan.
Meanwhile DJs retail director Aaron Faraguna said the sale will allow it to focus on the further refurbishment and optimisation of its adjacent 310 Bourke St store.
“This will see us deliver all our categories in a cohesive and premium offering under one roof for customers. Our menswear store provides an exceptional opportunity in the heart of Melbourne’s CBD with potential to further enhance this vibrant precinct and we look forward to progressing the sale process.” Faraguna said.
Last month Woolworths Holdings CEO Ian Moir, said the sale would allow the retailer “to deliver a more integrated retail experience to customers in Melbourne’s CBD”.
“A single-store flagship housing the best local and international brands in one world-class destination will create a more seamless and cohesive experience for our customers.
“As we near completion of the redevelopment of our Elizabeth St flagship in Sydney, we remain committed to enhancing the in-store experience right across our retail network,” he said.
The $200 million revamp of the Elizabeth St store in Sydney is the result of DJs making a similar move in the Harbour City, 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 on Elizabeth St. Some parts of the site are already open, and completion is due in March.
Refurbishment of the 310 Bourke St store is earmarked for the beginning of 2021, 310 Bourke has around 25,000 sqm of floor area.
