TH Real Estate nabs Myer Family Investments’ stake in flagship Melbourne store

TH Real Estate has snapped up Myer Family Investments’ one-third stake in Melbourne Myer for $454m.

The Myer family is selling a stake in the iconic Myer Melbourne building.

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 about $454 million and marking the exit of the Myer Family Investments.

The deal, foreshadowed by The Australian in May, was cut at a crisp initial yield of 4.5 per cent, reflecting the record values to which premium retail properties in the heart of major cities have soared.

It also marked the replacement of one of Melbourne’s most storeyed families with a $US97 billion property funds heavyweight — TH Real Estate’s parent US financial services group TIAA — on the ownership register.

The 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 properties 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 head of retail investments, Australasia, Simon Rooney ran an off-market process for the interest in the landmark building, drawing extraordinary bids from domestic and offshore groups chasing the highly strategic, super core retail asset in one of the nation’s prime retail precincts.

“The sale of Myer Melbourne continues the trend of very significant yield compression for core CBD assets, with the transaction recording a yield of just over 4.5 per cent,” Mr Rooney said.

He noted that Brookfield’s sale of a half stake in Sydney’s World Square for $285m last December had reset CBD yield benchmarks, with a 4.45 per cent passing yield recorded.

The Bourke Street Mall property was overhauled in 2011 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 a coup for the northern hemisphere-focused TH Real Estate to deepen its ties with the co-owners.

TH Real Estate head of capital transactions, Australia, Stephen Philp, said the property’s location at the centre of the strengthening core retail precinct in the Melbourne CBD was supportive of Myer’s long term occupancy of its flagship store.

“The acquisition fits our strategy of owning dominant, well-located, prime retail properties, that cater to today’s occupier needs, in the world’s most attractive real estate markets,” he said.

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.

Buying a slice of the iconic building, one of just 14 properties fronting the Bourke Street Mall, transforms TH Real Estate’s position on the local property scene and it is also chasing further deals, including capital partnerships.

The real estate specialist last year flagged plans to spend up to $1bn on Australian property and nominated its desire to buy retail properties to boost its platform, which spans more than $42bn of retail assets globally.

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.