Charter Hall circles Burwood One mall in Melbourne as convenience retail appeals

The Burwood One shopping centre that houses Australia’s first Kmart is in the sights of Charter Hall.

Property funds manager Charter Hall is stamping its authority on the shopping centre market, and is currently circling the Burwood One shopping centre complex in Melbourne in a deal worth about $210m.

The transaction comes as Charter Hall looks to fill out its expanding convenience retail fund, which has the capacity to buy $2.5bn worth of assets.

It shows the new Charter Hall Convenience Retail Fund is becoming a major force in local retail property after starting with a $1.35bn portfolio. It still has a capacity of more than $1bn and wants to capitalise on the fragmented $200bn sector where private developers and syndicators still have a major presence.

Charter Hall’s fund is buying at a time when rivals including QIC have flagged they will become more active. 

The manager exceeded expectations with an initial capital raising, and has since been in talks to raise more funds with the sector running hot, and it switches focus to off-market transactions.

The attraction of the retail sector is being driven by a combination of strong consumer spending, lower interest rates and demand from institutions for more certain returns from convenience style retailing, rather than being exposed to more volatile fashion segments.

Burwood One has transformed into an Asian food hotspot, with Australia’s first Marrybrown restaurant.

Burwood One last traded for $181.5m to a private Hong Kong-based investor in 2018. That deal showed a yield of about 5.11 per cent in what was one of the sharpest paid for a subregional centre, and it is likely to trade for about 5.5 per cent in the latest deal.

The transaction is being brokered by real estate agency Stonebridge’s Justin Dowers, Kelvin Tong and Carl Molony but the firm and Charter Hall declined to comment.

The Burwood East complex on the corner of Burwood Highway and Blackburn Road was previously owned by the Hansky family for 26 years. It is best-known for housing Australia’s oldest Kmart store, which opened in 1969.

The 58,780sq m site includes Coles and Aldi supermarkets, a First Choice Liquor outlet, specialty stores and a gym. Charter Hall was interested in the property as it is a triple-anchored supermarket site without a discount department store.

In 2023, the owner lodged redevelopment plans including a new dining and entertainment precinct. The $20m upgrade focused on the western side of the U-shaped shopping centre.

Burwood One has transformed into an Asian food hotspot, with Australia’s first Marrybrown restaurant, along with China Bar, Discovery Fusion BBQ Buffet, Dragon Hot Pot, and Wagyu Fund.

Charter Hall’s fund has already picked up centres from its sister vehicle Charter Hall Retail REIT, including Rockdale Plaza in Sydney, Campbellfield Plaza in Melbourne, Bribie Island Central in Brisbane and Swan View Central in Perth. It also took on some of the fund’s investments in partnership assets.

The fund included $504m of fresh acquisitions made by Charter Hall including Chullora Marketplace in Sydney, and Waverley Gardens and Mernda Junction, both in Melbourne.