Shopping mall landlord Vicinity Centres has flagged it will boost its role as a developer as it puts the finishing touches to a $430 million makeover of The Glen that will see 555 apartments rise above the mall and key tenant David Jones cut its store size in half.
“We’re probably at a point now where we will increasingly be delivering projects ourselves as a developer,” Vicinity chief executive Grant Kelley said.
The new development focus is Vicinity’s key weapon against the online shopping juggernaut facing Australia’s retailers and The Glen, a centre it co-owns in Melbourne’s eastern suburbs with Perron Group, has been the strategy’s proving ground.
The retail fund manager is nearing completion of the fourth and final stage of its whole-of-centre redevelopment which will see 60 new stores, including a rebirthed David Jones, open on August 1 in the mall’s southern end near Glen Waverley train station.
The final stage has a new outdoor dining complex which features a Bia Hoi Vietnamese offering from Melbourne chef Jerry Mai, a Betty Burgers and Japanese restaurant Concrete Shujinko Ramen.
Chris Wilson, David Jones’ general manager of menswear and childrenswear, said while the new format store had downsized from 14,000 square metres to 8000 square metres, it had upsized on services.
In a shift from its traditional service, the retailer has beefed up offering with a personal shopping service, click and collect, beauty bars, concierge and hired an additional 20 full time staff, he said.
Its Country Road brands – Mimco, Treneary, Witchery, Politix and Country Road – will also take up large areas of floorspace and won’t have a standalone presence in the main mall.
“We continue to evolve our footprints to what the consumer needs. Service is something we want to offer our customers. It’s a point of difference for department stores,” Mr Wilson said.
“This is a good example of having a 14,000 square metres store and curating it down to 8000 square metres.”
The mall’s refurbishment included selling the air rights above The Glen to Jeff Xu’s Golden Age Group which has started construction on a three-tower Skygarden complex in which 555 apartments are complemented by a 4000 square metre resident-only garden on the centre’s rooftop.
The apartment complex, under construction by Probuild, is expected to be completed by 2021 and will be built in one hit, rather than as a staged development, after 60 per cent of apartments were pre-sold “during the downturn,” Mr Xu said.
“Now that confidence has come back we are very confident when the project is finished we will be up to 80 to 85 per cent sold,” he said.
Worth $450 million, Skygarden is Mr Xu’s biggest, in end value, project to date with apartments priced between $499,000 and $1.53 million for one and three bedroom units.
While building residential apartments on top of a shopping centre was relatively new in Australia, it was a mature concept in Asia, Mr Xu said.
“The people from around here are from Hong Kong, China and Malaysia. For them it’s not a new concept.”
Mr Kelley said there was “more upside” for Vicinity’s shareholders if the group played the role of developer.
“It’s not out there on the risk spectrum.”
“We need to do it in a way that’s off balance sheet and doesn’t jeopardise our retail business. The idea is, if we were to do mixed use development ourselves, it would be done off balance sheet and usually with partners. We would play the role of developer,” he said.
The next cab off the rank will be Vicinity’s Box Hill shopping centre, also in Melbourne’s east. Other malls under consideration include Bankstown in Sydney which has similar characteristics to Box Hill in being a primary transport hub in a heavily populated area.
The likely model for Vicinity’s developer aspirations will be to contribute land into a joint venture, bring in third party capital and develop it ourselves, he said.
“As we’ve got better at this, we don’t want to leave money on the table for our shareholders, we want to make sure we have full value capture,” Mr Kelley said.
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