Abacus lifts stake in Myer Melbourne building to 50pc

Large retail assets are coming back into fashion after a pricing reset.

Abacus Property Group has secured a bigger stake of the iconic Myer Melbourne building.

The top end of the retail property market is again resetting, with a slice of Melbourne history changing hands.

The listed Abacus Property Group quietly snapped up another slice of the iconic Myer Melbourne building from its co-owner, a listed Charter Hall real estate investment trust, taking its stake in the property to 50 per cent from 33 per cent.

The move was revealed as the Charter Hall Long WALE REIT disclosed a series of asset sales when delivering its results, including the part-sale of the department store building in the Victorian capital.

The trust said it had sold $96.2m worth of long-leased retail assets, including a 16.7 per cent stake in Myer Melbourne, which effectively halved its stake in the prominent Bourke Street Mall property to this level.

The $96.2m figure also included the $23m sale of the Redbank Plains Travel Centre in Queensland to Westbridge Funds Management. Once this is taken into account, the larger deal valued Myer Melbourne overall at about $439m, showing a slight lift in its capitalisation rate into the mid-6 per cent range.

Charter Hall and Abacus first took their two-thirds stake in the Bourke Street building in a joint $270m deal in 2021, with that transaction effectively valuing the complex at about $405m.

The Charter Hall trust said in 2021 that it had taken a 33.3 per cent tenants in common title interest in the property for $135.2m. Abacus, headed by retail specialist Steven Sewell, bought its one-third share at the same price. At the time it said that, excluding transaction costs, the deal reflected about $10,157 per square metre of gross lettable area and a 6 per cent passing yield.

The pair bought their interests from Singapore’s GIC Real Estate, which has been a long-term owner of the building, and fund manager Nuveen, in a deal that saw them invest alongside the building’s manager and one-third investor Vicinity Centres.

The imposing nine-storey building is one of the Victorian capital’s most prominent and the Myer family held a one-third stake in the flagship asset until 2016, when they sold out to global funds manager TH Real Estate – which later became Nuveen – in a $151.3m deal.

That deal showed a crip yield of about 4.5 per cent and the shift shows the impact of both higher interest rates and the issues faced by department stores as they cut back space to profitable locations and floors.

But the fact that value rose showed it had dodged the problems that had dogged large office buildings in the heart of Melbourne’s central business district. Many copped valuation falls as the state government had been unable to stimulate a return to work at a large scale.

The 2021 transaction was seen as confirming the adage about the safety of bricks and mortar, with the stake in the flagship property sold for close to the then stock market value of retailer Myer. The retailer was weighed down by lockdowns nationally but had since turned a corner.

While he declined to comment on the most recent transaction, Mr Sewell said in 2021 that the purchase “aligns with our strategic priority of acquiring commercial assets in select locations where we see amenity and infrastructure improvements that we believe will ultimately translate to strong tenant demand”.

The Charter Hall fund also has a stake in the David Jones Castlereagh Street store in Sydney, giving it holdings in another iconic CBD building that may one day be redeveloped. Charter Hall bought up city retail assets after the Covid-19 crisis, and in 2020 bought the David Jones store in Sydney for $510m.

Originally published as Abacus lifts stake in Myer Melbourne building to 50pc