Charter Hall tipped to offer $520m for David Jones’ Sydney CBD store

The David Jones building on Elizabeth Street in Sydney’s CBD. Picture: NCA NewsWire/Damian Shaw

Property investor Charter Hall will finalise its due diligence on the David Jones central Sydney store in Elizabeth Street next Monday, and is expected to offer $520m.

It will continue a long run of sale and lease-back transactions for the $5.3bn fund manager, which has done $8.5bn worth of such transactions over the past decade.

Charter Hall is said to be also looking at a sale and lease-back for milk and cereal manufacturing sites owned by the troubled Freedom Foods, joining a raft of other real estate companies competing for the opportunity.

Analysts estimate the Freedom Foods plant and equipment is worth about $589m.

Sale and lease-back transactions are being used by companies currently to raise much needed cash.

Charter Hall is also eyeing the real estate funds in the AMP Capital business.

AMP is understood to be running a dual-track process for a sale of the real estate business or a sale of the entire company through Goldman Sachs and Credit Suisse.

Besides Charter Hall, Dexus Property Group, GPT Group, Lendlease and Vicinity Centres are believed to have shown interest.

It is understood that potential buyers have now been ushered into the second round for the real estate auction.

However, AMP is believed to prefer a whole-of-company transaction, so many believe that the sales process for the real estate is in reality just a pricing exercise.

AMP on Friday confirmed that US-based Ares Management Corporation had made a bid for the company, but the general view around the market is that it is not high enough to win support.

The group is understood to have been trying to find parties to buy parts of the business other than AMP Capital.

Other major global buyout funds have been circling AMP, but most believe the share price needs to fall further before they can put forward an offer that makes sense for them.