Scentre Group and CBUS have finally secured the high-profile David Jones Market Street store in the heart of the Sydney CBD.
Contracts were exchanged late Monday on the purchase from David Jones, now controlled by South Africa’s Woolworths Holdings.
The price for the site at 77 Market Street is $360 million, considerably more than was estimated when the property was put up for sale last year.
Scentre will pay $182.5 million and Cbus will fork out the balance of $177.5 million.
According to a statement released to the Australian Securities Exchange, David Jones will continue to occupy the site until late 2019 under a lease agreement, paying an annual rent equivalent to a 4.5 per cent rental return on the acquisition price.
During the leaseback period, the co-owners will obtain the necessary approvals to redevelop the site when David Jones vacates the building.
At the moment, the Market Street site is occupied by a 13-storey building but it could rise to 20 storeys.
After development, the 2500sq m site will have 10,000sq m of luxury retail space connected to the strongly-traded Westfield Sydney, which is directly opposite and owned by Scentre.
Scentre Group will own, develop, design and build the retail elements of the site.
“This transaction is a rare opportunity to significantly expand our flagship Westfield Sydney centre,” Scentre Group chief executive Peter Allen said.
“The 77 Market Street site will provide the opportunity for further luxury retail and high-quality food, which combined with our existing Westfield Sydney and David Jones’ planned $200 million investment into the adjacent Elizabeth Street store, will reinforce the precinct as Sydney’s pre-eminent luxury retail destination.”
Cbus will convert the balance of the existing building into office space and a luxury residential tower above, overlooking Hyde Park.
CBus chief executive Adrian Pozzo said the acquisition would complement the company’s soon to commence $1.25 billion development at 447 Collins Street, Melbourne.
David Jones has two CBD flagships in Sydney and two in Melbourne and plans to consolidate into one store in each city.
Last week, David Jones announced the $200 million plans to expand its retail space in the Elizabeth Street property to create an 11-level, 39,000 sq m luxury department store.
Rothschild advised David Jones on the sale, which was handled by CBRE’s Scott Gray-Spencer and Savills’ Simon Fenn.
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