Project Overview
Client
Listed & Private Companies & Corporations
Property Type
Mixed Use (Heritage, Retail, Commercial and Residential Redevelopment Potential)
Reason for Service
Sale and leaseback valuation and redevelopment assessment
Preston Rowe Paterson was engaged to undertake an independent market valuation of the David Jones Market Street flagship property to support a proposed sale and leaseback transaction involving one of Sydney’s most prominent CBD retail assets.
The instruction extended beyond a conventional valuation, requiring detailed analysis of a non standard scenario in which the property would be subject to a short term leaseback to David Jones, followed by a permanent change in use upon lease expiry. As a result, the assessment needed to consider both the asset’s immediate income generating capacity and its long term redevelopment and adaptive reuse potential.
This dual requirement necessitated the integration of income based valuation techniques with development feasibility analysis, planning considerations and market benchmarking.
Preston Rowe Paterson was required to evaluate how the removal of the existing department store use would fundamentally alter the asset’s value profile, and to determine its highest and best use within the context of heritage constraints, planning controls and evolving CBD market dynamics.
Summary of Scope of Services
The instruction required assessment under a non standard scenario involving:
- Short term leaseback to David Jones
- Removal of department store use in perpetuity following lease expiry
- Repositioning of the asset based on its future adaptive reuse potential
This necessitated a dual perspective valuation approach considering both short term income and long term redevelopment potential.
Asset Overview:
A landmark CBD department store comprising a 15 level mixed use building with a gross lettable area of approximately 27,862 square metres on a 2,510 square metre site. The asset occupies a prime position at the intersection of Market and Castlereagh Streets within Sydney’s luxury retail and tourism precinct.
The property is heritage listed under the Sydney LEP 2012 and directly connected to key retail destinations including Pitt Street Mall, Westfield Sydney and the Elizabeth Street luxury retail strip.
Key Considerations
The valuation required careful analysis of several complex factors:
- Functional obsolescence of traditional department store use
- Heritage constraints impacting redevelopment flexibility
- Planning controls including a base floor space ratio of 8 to 1 and potential uplift incentives
- Mixed use redevelopment potential including retail, commercial and residential components
- Strong underlying demand for prime CBD residential and retail assets
Valuation Methodology
Preston Rowe Paterson adopted a multi layered, institutional grade valuation methodology to determine market value.
- Discounted Cash Flow Analysis
Modelled leaseback income, transition to redevelopment, and project delivery risk, incorporating development costs, finance costs and developer profit margins. - Residual Land Value Analysis
Benchmarked alternative redevelopment scenarios including retail, commercial and residential outcomes. - Market Evidence Benchmarking
Analysed comparable Sydney CBD transactions, mixed use repositioning projects, apartment sales rates and leasing evidence across retail and office markets. - Sensitivity Testing
Tested key variables including yield movement, construction cost escalation, sale rate variability and developer margins
This engagement demonstrates Preston Rowe Paterson’s expertise in:
- Complex CBD investment valuation across multi asset portfolios;
- Statutory compensation assessment under the Lands Acquisition Just Terms Compensation Act 1991;
- Analysis of special value, disturbance and ownership synergies;
- Strategic advisory in relation to government acquisitions and infrastructure projects;
- Redevelopment feasibility modelling including integrated site amalgamation;
- Negotiation support through detailed analysis of acquisition offers and valuation metrics;
- Application of discounted cash flow and capitalisation methodologies in institutional grade assets; and
- Advising institutional clients on high value, high profile acquisition matters.
Outcome
This engagement demonstrates Preston Rowe Paterson’s capability in delivering complex, development focused valuations within constrained urban environments.
The assignment required integration of valuation expertise with development feasibility, planning analysis and capital markets insight to provide:
- A robust and defensible valuation platform
- Clear articulation of redevelopment scenarios
- Commercially relevant advice to support transaction structuring
Approximately
2,510m²
Site Area
A total of
15
levels
Approximately
27,862m²
Gross lettable area
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