David Jones flagship stores have $666 million potential
The partial sale and lease back of David Jones’ flagship stores or developing the sites to include residential or commercial property would not add value for shareholders, according to UBS.
Investors and analysts have been analysising the options for David Jones’ three Melbourne and Sydney flagship stores given the recent takeover speculation.
David Jones has been mooted as a potential leveraged buyout candidate, with much of the value around its property portfolio.
The three flagship stores have a $462.5 million book value, but UBS says they could secure $666 million on-market.
UBS considered three options for the properties: develop the sites to add storeys above for residential use; a partial sale; and a partial lease.
The broker concluded that adding storeys above the Sydney store would only add $47 million value, or a mere 9¢ a share, the Australian Financial Review reported.
UBS said combining the two Sydney sites into the one store was unlikely to work, but could add up to 4.1% to David Jones’ earnings per share if it did.
The third option, to explore leasing unproductive space in the higher levels, was “unlikely to be economical given”, the broker said, due to required capital expenditure, low rental rates and potential for new tenants to cannibalise David Jones' retail operations.
