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Fifty and flying: Pellicano diversifies pipeline

Financial Review
26th October 2017

After five decades in business, Pellicano has had a bit of time to figure what works best.

As Renato Pellicano explains, it is the mix of both a conservative balance sheet and flexibility in addressing market demand that has served the Melbourne-based company well.

Both those traits have been on display in recent times as the company, now run by the sons of its founders, celebrates 50 years in business this week.

Pellicano made headlines in July as it snared the first distribution centre for Amazon in this country, repurposing former Bunnings distribution in Melbourne’s south-east for the US e-commerce giant.

It is a significant moment for the retail sector, with many expecting Amazon’s arrival to herald a deeper transformation of shopping, potentially affecting retail landlords.

It was the company’s capacity for speed and flexibility in accommodating Amazon’s requirement that helped, Mr Pellicano said.

As he put it, there was no red tape and no “committee after committee” making sign-offs on their side that gave them an edge.

“I thought it might work against us being a private but it actually worked in our favour,” he said.

“The key to winning that deal was us being a family business appealed to them.

“We went ahead in good faith and gutted the building. We spent $400,000 without a signed building contract just on good faith. That’s want they responded to: we’re hands-on.”

And that’s how it was in 1967 when the firm began as a bricklaying business in suburban Melbourne with Italian migrant brothers Nunzio and Frank.

The next generation are now in charge: Renato and Michael, the sons of Nunzio, and Nando and Antonio, who are Frank’s sons.

 Where the conservatism kicks in is when the cousins consider how best to mitigate risk in their developments.

Over the past 10 years, Pellicano has diversified from its core exposure in industrial property development in Melbourne.

Now the portfolio – 170 properties and 710,000 square metres of built space – is spread more evenly between and industrial and residential, commercial and retail.

A big focus has been the move into residential development in Brisbane, where the surge of activity recently has prompted warnings from the Reserve Bank of Australia and others on the potential for oversupply.

 So far, so good for Pellicano, which settled a 147-apartment project, Trafalgar Lane in Woolloongabba, last year without a problem and is on track with settlements in the first completed tower of its ambitious $600 million South City Square project.

At South City, Pellicano has cannily spread the master-planned project out over a series of towers, mitigating its risk in the buzzing Brisbane market.

“As part of our conservatism, when you can have 400 apartments in one tower, it’s a big exposure, bigger risk, or we can have 800-odd apartments spread over eight buildings,” Mr Pellicano said.

“We prefer that. We’re private. We don’t want to go to the wholesale markets to raise funds. We’d prefer to do it off our own balance sheet.”

 In more recent years, Pellicano has diversified the portfolio further, adding serviced apartments, while still developing the Melbourne business parks Frank and Nunzio put together two decades ago.

As well, there are more mid-scale suburban Melbourne apartment towers on the drawing board.

All in all there is a $1.2 billion workbook ahead that the cousins will navigate, drawing on the family strengths of flexibility mixed with conservatism.

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