WESFARMERS is behind a $120 million bid for a 16.5 hectare development site in Melbourne's inner north, which will accommodate about 3000 people as well as a full-sized supermarket.
Listed company Amcor is selling its paper mill and recycling plant in Alphington, about seven kilometres from Melbourne's CBD, The Australian Financial Review reports.
If the sale to Wesfarmers goes ahead, it will be the latest deal in an emerging trend of joint ventures between retail giants Woolworths and Wesfarmers to create mixed-use projects. The trend allows retailers to maximise returns on their sites and means the residential development partner does not have to rely heavily on its balance sheet.
Amcor has had its site listed with Colliers International since 2009. Local and offshore developers have shown interest, but it has remained unsold and Amcor vacated the site in December last year.
Earlier this year, Amcor applied for a change in planning controls for the site, stating the existing rules were inflexible and deterred buyers.
A $120 million deal with Alpha Partners was dependent on the planning changes, approved last week. The deal is due to become unconditional at the end of June.
Sources close to the sale have confirmed Wesfarmers has backed Alpha Partners' move on the site. Wesfarmers had not responded to The Australian Financial Review by deadline.
Alpha Partners managing director Guy Nelson said he could not comment on other parties who might be involved.
Mr Nelson said the Alphington site was a prime urban renewal opportunity, though it needed considerable rehabilitation of the land.
John Darmody, director of consultancy Darms Property, said supermarket partnerships with residential developers would become more common, driven by competition between retailers to control local markets. Having a supermarket on a large parcel of residential land enhances its value to the developer, and the developer can carry out its own due diligence, assess site feasibility and go through the planning process without having the land on its balance sheet.
"It's a pretty powerful trend," he said.
In North Melbourne, Woolworths will build a $110 million project, which will include more than 300 apartments, a supermarket, retail and office space.
Woolworths is now seeking to sign on a residential developer.
After winning a battle against local residents and council, the Victorian Civil and Administrative Tribunal ruled the project would provide renewal on a well-serviced, yet under-used, parcel of inner-city land.
CBRE director Mark Wizel there had been an increased appetite from institutions wanting to increase their exposure to broad-acre and medium-density residential markets.
