Global group TH Real Estate grabs historic Myer Melbourne stake

TH Real Estate has swooped on a one-third interest in venerable department store property, Myer Melbourne.

TH Real Estate has bought a one third interest in the venerable Myer Melbourne property.

Global fund manager TH Real Estate has swooped on a one-third interest in venerable department store property, Myer Melbourne, with the deal valuing the high-profile complex at more than $450 million and marking the exit of the Myer Family Investments once it is finalised.

The deal may be cut at a crisp initial yield of about 5 per cent, reflecting not only the record values to which premium retail properties in the heart of major cities have soared, but also marking the replacement of one of Melbourne’s most storeyed families with a $US95.7 billion property funds heavyweight on the ownership register.

The discreet Melbourne-based private investment house quietly put its interest in the property on the block in February. It picked up the asset as part of a larger deal in which it teamed with the then CFS Retail Property Trust — now part of Vicinity Centres — and Singapore’s GIC Real Estate to buy the site on Bourke and Lonsdale streets in mid-2007 for close to $600m.

That deal also included holdings GIC and CFS transformed into Emporium Melbourne. Myer Melbourne has since been dramatically overhauled and it is the department store chain’s leading flagship store.

JLL’s Simon Rooney is running an off-market process shrouded in secrecy but the building is known to have attracted extraordinary bids from domestic and offshore groups seeking out the highly strategic, super core retail asset in one of the country’s prime retail precincts.

The Bourke Street Mall property has just been through a complete overhaul and is benefiting from the healthy performance of the Emporium. The strip on which it sits is the premiere precinct of the Melbourne CBD and the focal point of the bustling retail track equidistant between Flinders and La Trobe streets.

Both GIC and Vicinity, which manages the centre, are considered high quality partners and it is coup for the northern hemisphere-focused TH Real Estate to deepen its ties with the co-owners.

The parties and the agent did not return calls this week as the deal is in its final stages.

Myer Melbourne dominates the block on which it sits, spanning 39,923sq m over nine floors with an unparalleled frontage to Bourke Street Mall. The historic building is part of the city’s landscape and has run as a flagship department store since 1914.

The property carries a 21-year lease until 2031, offering annual rental growth and exposure to the blue-chip listed department store operator.

CBD retail transactions leapt to $1.2bn last year, rising over $600m for the first time since 2007. Key deals included superannuation fund-backed ISPT buying a half share in World Square in Sydney for $285m and private equity group Blackstone swooping on Rundle Place and 80 Grenfell Street in Adelaide for about $400m.

The pricing on the TH Real Estate’s purchase reflects these deals and institutions are also lining up as US heavyweight ­LaSalle Investment Management offers its $500m Novotel on Collins hotel and St Collins Lane fashion and dining precinct via JLL.

TH Real Estate manages about $US95.7bn of real estate ­assets across about 50 funds and mandates but it not known how any purchase of the Myer property asset would be structured. Buying a slice of the iconic building, one of just 14 properties fronting the Bourke Street Mall, would help transform the group’s position on the local property scene.

The real estate specialist, owned by top financial services company TIAA, last year flagged plans to spend up to $1bn on Australian property and nominated its desire to buy retail properties to boost its platform.

Early moves in TH Real Estate’s Australian expansion included striking a strategic alliance with Mirvac Group, and was advanced by it taking stakes in flagship properties 101 Miller Street and Greenwood Plaza in North Sydney and 699 Bourke Street in Melbourne. The group also ­secured a 75 per cent stake of Brisbane’s Mount Ommaney shopping centre from AMP Capital in October 2014.