Listed groups and wealthy families have expressed interest in David Jones’s real estate portfolio as the sale process remains on track despite lockdowns in Victoria.
It is understood that some parties have already signed non-disclosure agreements to receive documents for the sale of the prime real estate assets in the central business districts of Melbourne and Sydney.
However, last week they were yet to receive documentation for the sale that was supposed to be well under way in the past fortnight, leading some to question whether it had paused.
But David Jones says it remains on track.
Among those that have signed confidentiality agreements are at least one wealthy private family and at least one Australian listed real estate group, possibly a mid-market investor such as Abacus Property or Primewest.
Some believe the large listed retail landlords would shy away from an acquisition, with those interested more focused on the alternative uses for the site.
The lease terms for David Jones are expected to be the key to any deal. It is battling challenging trading conditions linked to COVID-19 and digital disruption.
Market analysts believe that any buyer would want the department store to pay rent of 7 per cent of sales, or about $15m-$20m annually, but most believe that rental payments of 5 per are more realistic.
The sale of its real estate assets through investment bank UBS will enable David Jones to secure between $500m and $1bn to help pay down its debt load.
South African parent Woolworths has loans of more than $400m across its overall Australian operations which includes Country Road.
The sale comes amid talk that the anticipated departure of Ian Moir is imminent. He previously headed the Australian retail operations for Woolworths South Africa and is now focused on running David Jones.
Mr Moir led the $2.1bn takeover of David Jones in 2014.
Flagship David Jones properties at Elizabeth Street in Sydney and Bourke Street in Melbourne are on offer.
The department store has already offloaded properties to free up cash, selling its Market Street building in Sydney’s CBD to Westfield owner Scentre and Cbus Property for $360m in 2016.
Rental deals remain the key factor for all Australian retailers battling for survival, with voluntary administration one way for some to walk away from existing agreements with landlords.
Landlords for shopping centres in Melbourne, which is currently in a COVID-19-related lockdown, have been offering tenants a three-month rental-free period in exchange for signing up for an additional leasing period of up to three years, say market sources.
David Jones’ rival Myer is said to be currently paying about 6 per cent of its turnover amid the COVID-19 conditions in Victoria, say sources, while the closure of Target stores by Wesfarmers is said to be wreaking havoc for some retail landlords.
Tenants said to be playing hardball with landlords are Solomon Lew’s Just Group, Sussan and Mosaic Brands.
KordaMentha’s announcement on Monday that Seafolly’s preferred bidder is L. Catterton confirmed the suspicions of many: that its private equity owners may try to buy the business back out of voluntary administration and recut lease terms.
The swimwear brand, which was purchased by the Louis Vuitton-backed Asian private equity firm through a series of transactions between 2014 and 2018, fell into voluntary administration on June 29.
Administrators Scott Langdon and Rahul Goyal of KordaMentha said the private equity firm’s offer was preferred because it provided the best return to all creditors, including its suppliers.
Sims could reap windfall from land sales
Some in the market believe that Sims needs to put some more thought towards selling more assets.
Bids due for BGC building materials empire
The contest is well under way for parties to buy the $800m BGC building materials business based in Perth.