CFS Retail to buy four DFO outlets, but questions remain over struggling stores

Stricken property developer and manager Austexx has been thrown a lifeline by property giant Colonial First State Retail, which has agreed to buy four of the company’s DFO outlets for $498 million.

Austexx, which has rich list members David Goldberger and David Wieland and ACCC chairman Graeme Samuel as shareholders, has been trying to sell all or part of DFO chain for most of the year.

However, the company was almost placed in the hands of receivers in August after its lenders – who are owed more than $1 billion – became nervous.

The lenders finally agreed to allow Austexx enough breathing space to complete its South Wharf DFO complex in Melbourne, but the company has still been searching for a buyer for its eight DFO stores and three homemaker centres.

In a canny deal, CFS Retail has cherry picked the best performing DFO outlets. It will buy DFO outlets in Homebush in Sydney, Essendon and Moorabbin in Melbourne and a 50% stake in the South Wharf development.

CFS Retail has also picked up a homemaker centre in Essendon and a half share in a homemaker centre near South Wharf.

CFS Retail’s head of property, Darren Steinberg, made it clear he thinks his company has picked up a bargain.

“The DFO centres have been acquired at attractive pricing relative to recent comparable transactions and… this acquisition provides an opportunity to apply our intensive asset management capability to enhance long-term returns to unitholders,” he said in a statement.

“This is a significant milestone for CFX. It provides investors with exposure to a retail format which management expects, based on overseas experience, can achieve sales growth in excess of regional and sub-regional shopping centres over the medium-term.”

CFS Retail has also acquired the Australian ‘DFO’ and ‘Homemaker Hub’ brand names. The company says it plans to use these brands in Victoria, NSW and Western Australia and South Australia to “selectively expand CFX’s presence in these markets in the future”.

However, it remains unclear what will happen to Austexx’s remaining assets, including DFO outlets at Fyshwick in Canberra, Brisbane Airport, Jindalee in Brisbane and Cairns.

CFS Retail will provide Austexx with an exclusive license to use the brands in Queensland, Tasmania and the ACT, but the performance of these centres is under question.

Earlier this week, SmartCompany spoke to Tony Purdy, owner of the Timberland Furniture store at the Fyshwick DGO, who said the complex was struggling.

“I have been in this complex for two years and it’s been nowhere near full. It’s commercial suicide to place yourself in a position where you are surrounded by empty shops.”

The directors of Austexx were not available for comment prior to publication.