Myer sale pays for privateers

Myer sale pays for privateers
Turi Condon, Property editor
June 22, 2007

PRIVATE equity group Newbridge Capital looks set to reap a startling $300 million profit on the sale of the iconic Melbourne Myer store, just a year after it helped to buy the Myer department store chain out of the languishing Coles Myer empire.
The trophy site, which will be redeveloped over the next two years and reopened in 2009 after a $1.2 billion revamp, was yesterday bought by the Commonwealth Bank's retail property trust and giant Singapore investor GIC for a record-breaking price of almost $600 million.

The revamp will see the structure, whose facade will remain, backed by buildings designed like wrapped parcels and a giant glass dome above the historic Bourke Street emporium, in a project to be developed over five years.

The Commonwealth Bank's $4.8 billion CFS Retail Property Trust, in which Melbourne billionaire John Gandel has a 20 per cent stake, and its partners beat development heavyweight Lend Lease in the final round of bids, and exclusive negotiations are expected to be finalised in two to three weeks. The agreement was signed late yesterday afternoon.

The sale price shot up from over $500 million in the first round of bidding run by agent CB Richard Ellis.

Coles finally raised the white flag on the department store chain last year, selling it to Newbridge and the founding Myer family (which has about 8 per cent) for $1.4 billion.

Newbridge is thought to have paid as much as $300 million of the purchase price for the site, valued at $200 million two years ago. It was unsuccessfully offered for sale last year.

The CFS trust became the front runner in recent weeks, with the deal believed to hinge on Myer not losing income by trading thoughout the development process.

Myer will move into the new 42,000sqm Bourke Street store when it is completed in late 2009. The balance of the development of the new Lonsdale Street buildings, intersected by Melbourne-style laneways, then gets under way in earnest.

Darren Steinberg, head of listed property for the Commonwealth Bank's Colonial division, flew to Singapore this year to tempt that Government's real estate head Seek Ngee Huat to join its bid.

Yesterday, Mr Steinberg said Colonial had forged strong relationships in the investment community and, with its partners, would deliver an impressive building with an end value of $1.2 billion.

GIC, which manages more than $100 billion of foreign reserves - about 10 per cent invested in real estate - is already a big investor in Australian property, paying $717.5 million for a half-stake in Westfield's Parramatta shopping centre last month.

Myer is expected to account for 40 per cent of the income of the new development, leasing the Bourke Street store for up to 20 years.