Woolworths SA hires bankers to test interest in David Jones properties

Investment bank UBS has been hired to review options for David Jones' property portfolio, including its flagship sites in Sydney and Melbourne.

As first reported by this column on Wednesday, David Jones' owner, South Africa's Woolworths, has asked UBS' real estate team to consider all alternatives for the substantial real estate portfolio, in an effort to free up capital to fund a repositioning of its Australian investment.

David Jones' properties include hallmark stores in Elizabeth Street in Sydney's CBD and Bourke Street, Melbourne. The portfolio could be worth between $700 million and $1 billion, sources said.

David Jones' property, plant and equipment and intangible assets were worth 9540 million South African rand ($826 million) at the end of 2019, according to Woolworths' annual report.

A sale is expected to be considered, among other strategic options.

News of UBS' appointment comes after a prolonged difficult period for the premium retailer. David Jones' owner Woolworths has written down its value numerous times since it bought the 180-odd year old department store player for $2.1 billion in 2014.

As of the end of 2019, David Jones was sitting on Woolworths' books for $965 million.

It has struggled in a tough retail trading environment and its profits fell 57 per cent to $20 million in the December-half due to heavy discounting, weak sales and poor foot traffic.

It also comes four years after Woolworths sold David Jones' historic Market Street store in Sydney to Cbus Property and Scentre for $360 million, a store it had owned since the 1930s.

The premium retailer has more than 40 stores around Australia, with one outpost in New Zealand, in Auckland. Its flagship Elizabeth Street store accounts for about 15 per cent of its total sales.

The mandate with Woolies SA comes as the Swiss bank runs deals for Telstra's giant data centre complex in Melbourne; petrol stations owned by Caltex Australia; and a handful of Qube Holdings sites, including its logistics park at Moorebank in Sydney.

UBS has overseen a string of similar real estate transactions in the past 12 months including Telstra's $700 million property sale to investors led by Charter Hall and biscuitmaker Arnott's property sell-off alongside real estate agency CBRE.