Myer Melbourne trades to local property pair as city reopens

Retail may be doing it tough but two big groups have swooped to buy a two-thirds stake in Melbourne’s landmark Myer building.

The Myer department store in Melbourne’s Bourke Street Mall. Picture: Andrew Henshaw

The move to sell the landmark Myer Melbourne building has been consummated by Charter Hall’s listed long lease property trust and the Abacus Property Group, with the pair swooping on a two-thirds stake in the Bourke Street building in a $270m deal.

The final transaction confirmed the adage of safety in bricks and mortar, with the stake in the flagship property sold for close to the stock market value of retailer Myer.

The retailer is currently weighed down by lockdowns nationally but the Melbourne property is currently open and its sale could mark a return to larger retail assets selling.

The sale represents the largest CBD retail transaction in Australia to date in 2021 and the largest Melbourne CBD retail transaction in more than 13 years.

The buyers picked up their interests from Singapore’s GIC Real Estate, which has been a long-term owner of the building, and fund manager Nuveen, which acquired the stake in the Myer building five years ago. The deal brings them in alongside existing manager and one-third investor Vicinity Centres.

Colliers International’s Lachlan MacGillivray and JLL’s Sam Hatcher and Nick Willis handled the deal.

Charter Hall has been buying city retail assets and last year bought the David Jones store in Sydney for $510m. It will place the latest asset in its Charter Hall WALE REIT.

The trust said it had taken a 33.3 per cent tenants in common title interest in the Myer Bourke Street Mall property for $135.2m, as it unveiled a series of smaller deals.

Fund manager Avi Anger said the Myer Bourke Street Mall property, together with the trust‘s existing investment in the David Jones Castlereagh Street store in Sydney, represented two of Australia’s most iconic CBD buildings.

The listed Abacus Property Group said it had also bought its one third share at the same price, which it said excluding transaction costs and reflected about $10,157 per square metre of gross lettable area and a 6 per cent passing yield.

The Myer department store is one of central Melbourne’s best-known retail buildings. Picture: Andrew Henshaw

The property is one of Melbourne CBD’s best-known buildings and is located in a prominent position on the Bourke Street Mall, with a 61 metre frontage offering nine levels of retail accommodation over about 40,000sq m of gross lettable area.

The building has a weighted average lease expiry of ten and a half years and is fully leased to Myer Pty Limited and guaranteed by Myer Holdings Limited.

Abacus managing director Steven Sewell said the company had taken advantage of the “intergenerational opportunity with longer term repositioning potential”.

“This transaction 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,” he said.

“With the potential for a degree of repositioning, this is a great opportunity for the group, together with its partners, to implement active asset management plans and drive superior returns from the asset,” he said.

The agents pointed to the longer term use of the site which could eventually include offices, depending on the fate of the retailer.

“Myer Melbourne represented one of the best CBD retail offerings in Australian history,” Mr MacGillivray said. “Whilst Myer Melbourne represents a highly successful business and the strongest single performing department store in Australia, it also represents a significant opportunity for positive rental reversion through mixed use conversion in an irreplaceable location.”

The nine levels are used for retail space but Myer could give back some floors in coming years. “With its unprecedented prime Bourke Street Mall frontage, expansive open floor plates and high ceilings drenched in natural light, Myer Melbourne offers flexible future outcomes for the combined ownership group,” Mr Hatcher said.

The Charter Hall trust is also buying a distribution centre leased to Simon National Carriers in Carole Park, Brisbane, for $83.1m. It also bought a Bunnings property in Baldivis, Perth for $49m.

The acquisitions will be funded from the REIT’s existing debt capacity, including the proceeds of a recently completed $200m issuance of 8.5 year Australian dollar medium term notes.

The trust upgraded its fiscal 2022 operating earnings per security guidance to growth of no less than 4.5 per cent on forecast fiscal 2021 of operating EPS of 29.2c per security.