Newmark Capital tipped as buyer of $120m David Jones store

Melbourne-based Newmark Capital has started the ball rolling in post COVID-19 retail property deals, amid speculation it has snapped up the David Jones menswear store in Bourke Street Mall, with a price tag of around $120 million.

Woolworths South Africa, which owns the David Jones and Country Road businesses, confirmed in a statement the group had exchanged contracts on the menswear store.

"The sale price achieved is in line with expectations and final settlement is anticipated before the end of July," Woolworths Holdings said. It did not name the buyer.

Newmark’s Chris Langford, who co-founded the fund manager with Simon T Morris, would not comment. "It’s cracking real estate is all that I can say".

Newmark is no stranger to retail property as the owner of the popular Jam Factory complex in South Yarra and multiple other assets through its individual unlisted property funds.

'It’s cracking real estate is all that I can say.'Newmark co-founder Chris Langford

The menswear store is on the south side of the mall, opposite David Jones' main emporium next to Myer. Its sale comes as Woolworths South Africa appoints investment bank UBS to undertake strategic review of the ownership structure of the two remaining David Jones flagship stores in Melbourne and Sydney's Elizabeth Street, estimated to be worth a combined $1 billion.

The review will investigate an outright sale of one or both of the assets, or a partial sell-down in both properties to a trust format. David Jones would remain the tenant in a lease-back scheme. David Jones bought its city properties from Deutsche Bank in 2006.

David Jones has undertaken significant upgrades at its Elizabeth Street store, with the addition of a new shoe emporium and upmarket cosmetic floors and has moved its famous food hall into the basement.

In Melbourne, the flagship Bourke Street Mall store has been steadily upgraded and now includes many of the world's most sought-after brands.

To help fund the upgrades, David Jones sold its Sydney's menswear store at 77 Market Street in 2016 for $360 million to Westfield mall owner and manager, Scentre group and Cbus Property, which are planning a mixed development of upmarket retail, an office component and apartments.

Luxury brand Chanel is said to be leasing the ground floor corner of Pitt and Market Streets as the anchor for the new retail floors.

Scentre has been tipped as a potential buyer of the adjoining David Jones Elizabeth Street site should it be offered as a full sale.

To help reduce its debt, David Jones is also looking to reduce its footprint across its current store portfolio with a planned 20 per cent drop in space by 2026.

Its peer Myer has been doing the same amid falling sales, while Wesfarmers' the owner of Target will close down 10-25 full-line stores and 50 country stores. Major retailers are also negotiating with landlords to pay rent on sales turnover rather than the traditional per square metre basis.

Myer and David Jones are the still the largest tenants in most shopping centres, despite some floor space shrinkage, and have been in discussions with landlords to change the way they pay rent.

Woolworths Holdings' Roy Bagattini said the tough and unprecedented trading conditions have dramatically impacted performance across the retail sector globally.

"We remain focussed on the implementation of the strategic initiatives that will address the current and emerging needs of all our stakeholders. By doing this we will position the business well for long-term future growth and success," Mr Bagattini said.

Macquarie Equities' analysts Stuart McLean and Darren Leung said David Jones and the Country Road group are looking to rationalise footprints which will hit shopping centre landlords, which are already under pressure from flagging consumer sentiment and the impact of the coronavirus.

"With similar programs from Myer and Big W, backfill remains difficult. We remain cautious on the outlook for retail landlords," the analysts said.