Chemist Warehouse co-founders Gance, Verrocchi in $5b property play

They are also two of 12 property-owning families investing in the company that has just paid $19.4 million for the heritage Heckelmanns building at 171 Elizabeth Street in the Brisbane CBD, as well as $10.85 million to purchase a three-level heritage-listed property at 150 Rundle Mall, in the Adelaide CBD’s high-profile pedestrian retail strip.

The company now sees an opportunity to pair with other family offices to redevelop and upgrade their assets and invest in new ones.

“Within five years, we want to have approximately $5 billion worth of assets management,” Spektor told The Australian Financial Review.

“We need to be looking at more neighbourhood shopping centres, perhaps slightly bigger shopping centres, you know, sub-regional or regional shopping centres.”

The push for growth hinges on two major changes in retail property – an ageing generation of owners looking for continuity and a resurgence in retail property values as the post-pandemic economy matures.

Assets the group is targeting were likely to include smaller shopping centres that had been in private hands for many years and whose owners may not have family members interested or able to take them on, Spektor said.

“There’s a lot of emotion attached to a lot of these properties,” Spektor said.

“We see it a lot, where one generation buys and develops an asset, the next generation may or may not have the expertise and desire to really create the value that that asset needs.”

This was creating space for a professional management business to step in, he said.

“That’s where we come into it. And given the current environment in property prices, the well-publicised generational wealth transfer that’s happening, we’ve developed a real niche in real property assets, creating generational views and timelines in a world where not everyone is as in love with bricks and mortar as perhaps older generations were.”

It was also an opportunity for the company at a time when a lack of new supply meant values of existing retail assets were rising, he said.

Some assets in the National Retail portfolio are held directly by owners, others by funds the company manages.

The foundation of the business was managing properties the Chemist Warehouse co-founders owned and leased to their retail pharmacy chain. And while that was still the case for a “significant” number of properties in the NRG portfolio, they were no longer the majority of assets, Spektor said.

The company was now offering a “white-glove” property services business to take on retail property assets owned by other wealthy families, he said.

“We manage the entire lifecycle, from site identification, acquisition, planning, development, leasing, and then management and stabilisation of the assets,” he said.

But anything they took needed to have scope for improvement, whether in renovation, redevelopment or in building new, complementary assets, he said.

“We’re a terrible passenger – we like to be in the driver’s seat,” Spektor said.

“We only buy properties where we know we can create value. We truly have a generational lens and time frame on everything we do.”

That was the case with the four-level building in the Brisbane city centre, built between 1884 and 1891 and designed by Andrea Giovanni Stombuco, a Florence-born, self-taught architect who worked in South Africa, Victoria and NSW before moving to Brisbane.

While the facade was heritage protected, zoning permitted a tower to be built behind the front face, but it was not commercially feasible to do so now, Spektor said.

“We are going to refurbish the office floors there and represent them back to the market as really special, high-grade office space,” he said.

“The ground floor and the basement have always been retail, and when the existing tenants leave will be refurbished and rehashed into two retail floors.”

The group will reassess the site after 10 to 15 years, Spektor said.

“Maybe at that stage, the market fundamentals have turned and redeveloping a tower on it makes sense at that time.”

The Rundle Mall building, designed by Daniel Garlick and Son and built by F Codd in 1886–87, also has no restriction on future tower development.

But the push for scale was also making the group focus on larger sites, such as neighbourhood activity centres – those anchored by a supermarket, with a spread of specialty shops and surplus land – as it had recently done at the $200 million Epsom Village Shopping Centre expansion in regional Victoria’s Bendigo.

“We came in and identified some surplus land and some adjoining land that we could buy,” he said.

“We went and got a planning permit, and have just opened the next stage of that, which now includes a Dan Murphy’s, Hungry Jack’s, six food tenancies, a medical building, an upgrade of the main centre building and a brand-new intersection for the community.”