In one of the few major distressed sales of the year, JP Morgan has sold it St Collins Lane Centre in the heart of Melbourne at a 50% discount to its acquisition price.
JP Morgan acquired the Centre from LaSalle Investment Management in 2016 on a yield of about 6%. LaSalle had re-positioned the mall, stripping out the sloping floors which made it difficult to connect through to Little Collins and thus complete the retail “ant trail” from Flinders Lane all the way to Melbourne Central.
The theory was good, but the design and execution was poor. On completion in May 2016, only 40 out of 55 stores had been leased and within 12 months only 30 remained trading.
JP Morgan managed to introduce Debenhams to the lower level at cost of $8m with high hopes of a turn around for the mall.
That was to be the first of about 10 Debenhams stores planned for Australia through a franchise agreement with local retail group Greenlit Brands, which owns Harris Scarfe, Best & Less, Freedom, Fantastic Furniture and Snooze. Debenhams parent company however collapsed into administration in the UK in April 2019, forcing Greenlite to close the store and abandon its plans for brand in Australia.
The decision was made to sell the Centre in March 2020 with hopes of securing at least $150m for the Centre. The sale process kicked off just prior to COVID, however by the time parties were able to commence due diligence, the pools of capital willing to invest dried up.
By July 2020, Vantage Capital had managed to find an offshore purchaser willing to take advantage of the distressed sale, with the parties exchanging contracts this week at $125m.
Vantage is a capable value add manager and has focused St Kilda Road and and other Melbourne suburbs, where it has partnered with KKR and high net worth investors to re-position, refurbish and re-tenant older buildings. In the CBD, Vantage acquired in 2015 a vacant building across the road from St Collins Lane for $22m and managed to fully lease the asset and sell it for $35m in 2019.
The group hope to do the same with St Collins Lane, though the going will be tougher.
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