Hard-working private developer Pellicano has beefed up its already burgeoning industrial portfolio, acquiring Australia’s biggest drive-in theatre, 35km south-east of Melbourne.
What the 55-year-old Melbourne-based developer paid for the Lunar Drive-In Dandenong and its four giant screens has not been revealed, but The Urban Developer has confirmed it was less than the expected $45 million.
The 66-year-old drive-in sits on 5.92ha of commercial-2 zoning at a time when Australia’s industrial and logistics vacancy rate is at a world-low of 0.8 per cent.
It was the site’s easy access to Dandenong Bypass, Princes Highway, Monash Freeway and Eastlink that generated all the interest.
GO Commercial Industrial director Andrew O’Connell, who brokered the sale, said they’d had 70 inquiries about the drive-in, virtually all of them driven by the site’s potential for an industrial fit-out.
There were seven expressions of interest, which GO Commercial short-listed to five. All five were invited to a second round.
Pellicano managing director Renato Pellicano said it was the site’s proximity to two more of their almost fully developed industrial sites—Innovation Park and M1/M2 Industry Park, both in Dandenong South—which made the drive-in additionally attractive.
“Weve been developing in Dandenong for more than 30 years, so it's what we know,” said Pellicano. “There’s probably a bit of comfort in that, it’s an area we like.”
O’Connell confirmed none of the participants had reached the expected selling price of $45 million.
“No, I was not disappointed,” he said.
“The interest rate rises, cost of construction, servicing of the land,—all those sorts of things worked against us in this instance.
“It’s fair to say if this had been six months earlier, that number would have absolutely bolted in.”
Pellicano counts about $4 billion of completed development across residential, commercial, retail and industrial, and owns more than 180 properties.
“Industrial has been a bedrock for us for since 1990,” he said. “It represents probably about 50 per cent of our total portfolio.
“We’re private, so we don’t spend a lot of time identifying a particular focus. It’s basically just about opportunity, and you don't know when and where opportunity is going to present, but when it does we're malleable and nimble enough that we can have a crack at it.”
O’Connell said there had been a lot of interest from owner-occupiers, including a steel factory and a car-wrecking company, but “at the end of the day, none of them stepped up with an offer”.
There was no serious interest from other drive-in operators.
“There were definitely some inquires early, but when you break it down and look at things like the land tax and other running costs, it’s just hard,” he said.
It was the costs of servicing the land that forced the drive-in—one of 12 still operating in Australia—to market about a month ago.
David Kilderry, who with brother Matthew first leased the site around 2002 and then bought it in 2016, blamed sky-rocketing land taxes.
“Our land tax this year is $410,000 and within two years, the way it’s started to zoom up, it’ll be over $700,000,” he said.
Kilderry said he had mixed feelings about this week’s sale.
“We discussed it,” he said. “We would love to keep running the drive-in, but the costs very soon ate up the revenue. And that's not a great equation to have to live with.”
He said he was happy with the price.
“If we could have realized a part of this money and been able to keep running, we would have. We certainly explored those opportunities, but it was not viable for us to go forward other than having to sell the site to a developer.”
Pellicano began as a brick-laying business by two brothers, Frank and Nunzio, in 1967. Today, three generations of Pellicano work within the company. Renato Pellicano, his brother and two cousins are all managing directors. His father, Nunzio, is still working.
“I’ve probably driven past it for 20 years,” Pellicano said. “And then last month it came to market, so we pounced on it.”
Has he ever been to see a movie at the drive-in?
“No, but my father has.”
The Lunar Dandenong will hang up its speakers for the last time mid-way through next year.
