16 Aug 2016

Scentre joins Cbus Property for DJs store tilt

Listed heavyweight the Scentre Group is striking up an alliance with superannuation fund-backed Cbus Property as it moves to acquire Sydney’s landmark David Jones menswear store in a play worth about $370 million.

The local Westfield arm last month saw off competition from a joint venture between the listed Stockland and Cbus Property but went in search of a partner interested in developing the site’s air rights.

Scentre is understood to have approached Cbus Property, which was familiar with the asset after its work with Stockland.

The Melbourne-based group has hopes of developing luxury apartments in the upper floors of the historic retail complex, which are now used as offices, and in a tower above the building.

The deal, to be unveiled within days, by David Jones’ owner, South Africa’s Woolworths Holdings, would be well received due to Cbus Property’s expertise in developing high-class towers.

The group will soon top out its $350m luxury project, 35 Spring Street, at the Paris end of Melbourne’s central business district. That 43-level tower sold out soon after its 2014 launch.

Cbus Property chief executive Adrian Pozzo noted the milestone but declined to comment on any Sydney play. “This is an exciting time for Cbus Property as we near the successful completion of our first premium residential project in Melbourne’s CBD, setting a new benchmark for our current inner-city, high-end developments in East Melbourne and at 447 Collins Street,” he said.

The group’s $1.25 billion mixed-use project at 447 Collins Street, Collins Arch, will include 205 apartments, as well as office, hotel and a retail space. In East Melbourne it is working with Brookfield on a $150m project.

Cbus Property is already a major player in Sydney’s apartment boom. Last year it sold out the luxury Milsons Point development 88 Alfred Street and bought the former Inglis stables site in Randwick, where it plans about 750 luxury units. In Queensland, the group is also undertaking projects including a $375m luxury apartment tower in Brisbane’s Queen Street.

The contest for the David Jones property, handled by real estate agents Scott Gray-Spencer of CBRE and Simon Fenn of Savills, has been hard-fought.

Scentre appeared to be out of the race early on, but its desire to extend the reach of its Westfield Sydney flagship into a new building saw it strike up direct negotiations with David Jones.

Scentre drew on its extensive ties with Woolworths Holdings to press its case as it owns centres in Australia and NZ that house David Jones stores and those of Country Road Group.

David Jones will use the sale proceeds to help back the redevelopment of its adjacent flagship Elizabeth Street store, which it is aiming to overhaul so it can accommodate departments from Market Street. Market analysts have suggested Scentre should capitalise on its strong pricing and undertake an equity raising if it buys the DJs store.

The landlord has an active development pipeline and last month redeemed about $600m of property-linked notes. But teaming with Cbus Property may lessen the strain on its balance sheet.

The parties and agencies involved declined to comment on Market Street yesterday.

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