Vicinity takes control of DFO with $141 million deal
Vicinity Centres has taken full control of the busy DFO South Wharf and Homemaker Hub in central Melbourne, buying out the remaining 25 per cent stake from its joint owner Plenary Group for $141.25 million.
The popular discount retail outlet is one of four that Vicinity’s predecessor CFS Retail bought into seven years ago as the shopping centre created by Austexx faced collapse.
That move has been well vindicated since, with the South Wharf centre now posting strong sales growth, low occupancy costs of 10.2 per cent and specialty store sales per square metre of $9200.
“This transaction is in line with our strategy of increasing our investment in the very successful DFO portfolio,” said Vicinity’s chief investment officer Michael O’Brien.
The popular discount retail outlet is one of four that Vicinity’s predecessor CFS Retail bought into seven years ago. Photo: Supplied
“We believe there is scope for further income and capital value growth.
“The asset will be further enhanced in the short term with the completion next month of the new multi-deck car park providing approximately 300 additional spaces.”
The retail hub sits on the south bank of the Yarra River, just across from the CBD.
It is part of a larger precinct that includes the Hilton Melbourne South Wharf and the Melbourne Convention and Exhibition Centre.
As well as the new car park already underway, Plenary Group is forging ahead with a $200 million expansion of the convention centre, including a second 305-room hotel.
Mr O’Brien said the redevelopment will benefit the DFO South Wharf.
The retail facility comprises 166 specialty tenancies, while the homemaker centre has 21 tenancies. Also part of the complex is the South Wharf Promenade food precinct with 19 operators.
Vicinity is acquiring the final 25 per cent stake on a passing yield of around 7 per cent, using its debt facilities.
Since buying into the initial group of four DFOs, Vicinity has added to the portfolio. It has a joint venture for $145 million factory outlet at Perth Airport with the airport owner.
And last year Vicinity bought the Brisbane DFO for $55 million, including it in a DFO portfolio now worth $1.1 billion.
Since acquiring the original portfolio, those four centres have delivered a 14.5 per cent internal rate of return for their owner as foot traffic increased and specialty store rents rose 6.8 per cent annually.
Presenting to an industry conference last week, Vicinity managing director Angus McNaughton enthused about the discount outlets. “They trade their socks off,” he said.
