Property Fund to become the biggest large format retail landlord in Australia. Under the approximately $725 million deal deal struck in late August after five months in the making, Home Consortium will take possession of over 700,000sqm of trading space across 40 Masters freehold trading sites, 21 freehold development sites and 21 leasehold sites in the coming months. With retailers hedging their bets while waiting for quality large format sites to hit the market, the stoush between Woolworths and US joint venture partner, Lowe’s, has not deterred retailers from taking up opportunities at Home Consortium’s new large format centres. As a result of the chronic shortage of sites, Home Consortium’s new multi-format sites have proven extremely popular with retailers, with 90 per cent of the over 700,000sqm of space already committed to before Masters has even closed doors. David Di Pilla Speaking to Inside Retail Weekly, David Di Pilla, the former managing director of USB Australia who is heading up Home Consortium, said the group has signed MOUs with a number of large format retailers and is in the process of moving towards full-formed leasing agreements. “We think that that reflects the underbuild and undersupply of large format retail space over recent years in Australia,” he said. With retailers at the beck and call of restrictive zoning issues in several states, Di Pilla said the consortium has had a fantastic response from retailers, with the Masters sites representing, “three to five years of catch-up in terms of supply to the market”. Home Consortium aims to have all 61 sites up and running by the third quarter of next year. With the Masters inventory wind-down process due to conclude in mid-December, the group expects to take possession of the sites in February next year once Woolworths has cleaned up the sites. Home Consortium has acquired next to new buildings in good locations with enough parking spaces, air conditioning and access points to service thousands of trolleys buckling under the loads of bulky goods – and still have room to spare. The wide spread of sites means Home Consortium is well placed to cater to the needs of local markets in satisfying supply and demand issues. “What is becoming apparent is that our cities are densing up and that the cores of the cities have traditionally been undersupplied. So more opportunities will arise in these areas,” argues property and retail economist, Justin Ganly, MD of Deep End Services. Taking it indoors Home Consortium will lease a number of the sites, in whole, to Bunnings, but the majority of the Masters sites will be split into between four and six individual tenancies. The sites will be reworked as internal malls, with cafes on site and all tenants trading into the mall, rather than the traditional, onto the car park trading seen in many large format centres. “We’re very excited by it,” Di Pilla said of the acquisition. “They’re great assets, great designs, relatively new buildings – their average age is three years – and they’re in good locations, have plenty of on grade car parking space, air conditioned, easy access. So it’s a great opportunity that we think is very suitable to large format retail.” Di Pilla told IRW that Home Consortium is in leasing talks with a number of large format retail household names including JB Hi-Fi, The Good Guys, Fantastic Furniture, Freedom, Nick Scali, and Amart. Chemist Warehouse and Spotlight Group, who form part of Home Consortium, will be leasing “a reasonable number of sites”, according to Di Pilla. “There’s been significant interest, and we think that they will be very complementary retailers all under the one roof,” he said. One name ruled out is the Steinhoff International-owned Poco discount furniture and homewares retailer, which despite entering Australia a number of years ago has so far only opened two stores, both in western Sydney. It had been suggested that Poco would use the Masters properties to aggressively expand its Australian store network. Major international retailers looking to roll out retail franchises in Australia are also in talks with Home Consortium to lease a number of the former Masters sites. Di Pilla said international players such as French sporting and camping retailer, Decathlon, which has had boots on the ground in Australia for nearly 12 months and has been actively seeking large format sites in western Sydney, represent logical clients for Home Consortium. Home Consortium has been working closely with retailers in the formulation of the concept and reformatting of the Masters sites. “We’ve worked very carefully with the retailers in order to develop the concept over the last four or five months and been talking to them closely to develop a concept with retailers for retailers,” Di Pilla explained. Such a concept involves attractive rent packages and building a platform for businesses to flourish at the sites. Having the wide degree of assets it does has allowed Home Consortium to offer retailers a slew of well-located sites as one bulk leasing package – a tantalising drawcard given the scarcity of supply. “You can sit there with a retailer and actually talk about 10 or 20 sites across the country,” said Di Pilla. “They can basically sit with us and have a three-year roll out plan, in some cases with some retailers, all in one negotiation.” The start of something big? While the approximately $725 million deal with Woolworths makes Home Consortium the largest large format retail landlord in Australia, the acquisition could just be the start of bigger things for the group. Di Pilla sees the purchase of the Masters sites as a platform for future growth and expansion in the sector. Though assuming the mantle of largest landlord in the growing large-format sector, which accounts for an estimated spend of $61.4 billion in bulky goods items in Australia, property commentators suggest the other key property groups won’t be deterred. While Home Consortium will be the largest owner of homemaker centres once all sites are repurposed, it won’t dominate what is a relatively fragmented market according to Ganly from Deep End Services. “There will be a handful of instances for other owners where a repurposed Masters store will create challenges, but the market is constantly evolving and the owners of centres close to stores that may be repurposed will already be working on alternatives where needed,” Ganly told IRW. This is a sentiment shared by Keith Kooloos, large format director at Savills, who says the likes of Aventus and Harvey Norman have been around long enough and are well established enough to deal with newcomers. “They won’t run into a mad panic – they’ll keep doing what they do well and been successful with,” Kooloos told IRW. “The only difference probably means the established players might not be able to get deals at quite sharper rates as they might have been used to…except they’ll keep moving right along and I don’t think they’ll be losing any sleep.” Reporting by Dimitri Sotiropoulos and Justin Grey.