Time's up for a confounding site
Launched with great fanfare in 2007, The Foundry has become an empty shell sitting on the edge of the busiest shopping precinct in the city, Bourke Street Mall.
It's main entrance is closed, sealed off after the last tenants fled the three-storey arcade that once promised to be a "sophisticated environment" delivering "a new standard of convenience and service retail" linking Bourke and Little Collins streets, according to advertising materials.
The Foundry's original developer and operator, 83 East Pty Ltd, is in liquidation after running up debts of more than $17 million and becoming embroiled in a series of lawsuits related to the project. Private equity group Brookfield Australia, which has owned the centre since 2008, has preferred to shutter it ahead of redevelopment rather than try to make it a going concern.
"It's a bit of an embarrassment that there is all that space available for retail that isn't being used," an industry source said. "But the complex was badly designed and configured from the start and has had no end of problems."
Developer Donnelly Group, using the entity 83 East, bought the site for $17.13 million in 2003, which comprised the heritage-listed John Danks Building at 399 Bourke Street with a second street frontage on Little Collins Street.
The $47 million mixed-use project included 92 apartments, a 6200-square-metre retail arcade spread over three levels, and a multistorey underground car park.
Opened in mid-2007, The Foundry was billed as a "unique new shopping, cafe and residential experience" that would offer a diverse range of 40 boutique-style shops and "best practice" eateries.
But court documents show the complex was beset with problems from the start, including a near total vacancy rate that 83 East concealed from prospective tenants in a bid to secure lease deals.
One of only three shops occupied at its launch, the Jamaica Blue cafe, closed within three months with losses estimated at nearly $400,000.
The Foundry was cold, "dark and gloomy", contaminated by dust, the escalators often didn't work, and there were no accessible customer toilets, the County Court heard in a 2010 lawsuit brought by the cafe's former operators against 83 East.
"There was virtually no pedestrian activity, either by reason of customers coming to deal with businesses in the Foundry, or by reason of the so-called "ant trail" [a new retail thoroughfare created between Bourke and Little Collins streets]," the judge found.
"Quite apart from there being no businesses in operation, there were no leases of all but a handful of shop premises in the Foundry and no prospective tenants for the shop premises that were unlet."
83 East, which was struggling under mounting debt and funding problems, put the site to market in 2008 at a speculated $140 million.
Japanese fund manager daVinci Advisors and Multiplex Developments, a subsidiary of Brookfield Australia, bought the property in 2008 for $87 million, along with an adjacent building at 405 Bourke Street. The joint venture's plan to build a $620 million office development was never implemented and Brookfield bought out daVinci in 2010.
In the meantime, businesses progressively abandoned The Foundry, including anchor tenant IGA. Apart from the car park operator, the last tenant is believed to have departed in early 2013.
Earlier this year, Planning Minister Matthew Guy granted approval to clear part of the site to build a 39-storey tower with 60,000 sq m of office space and 3700 sq m of retail.
Brookfield Australia said no date had been set for construction to begin. "Discussions are ongoing with several large tenant groups to anchor the development," a spokeswoman said.
But the prospect of future progress is little consolation to Matthew Kozik, operator of Eternal Addiction Tattoos. His shop's only frontage is on what was supposed to be the busy retail concourse cutting through The Foundry.
"It's been ridiculous," Mr Kozik said. "There are supposed to be a lot of plans for this place, but we haven't been told anything."
cvedelago@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
The Foundry is a mixed‑use retail and residential complex in Melbourne’s CBD, anchored around the heritage John Danks building at 399 Bourke Street with a second frontage on Little Collins Street. It opened in mid‑2007 as a three‑level retail arcade linking Bourke and Little Collins streets.
Court documents and industry sources say The Foundry suffered poor design and configuration, near‑total vacancy from launch, and operational problems — it was described as cold, dark and gloomy, contaminated by dust, with escalators often not working and no accessible customer toilets. The developer 83 East also concealed vacancy levels when seeking leases, which damaged tenant confidence.
The site was bought in 2003 by developer Donnelly Group using the entity 83 East. 83 East ran up debts of more than $17 million and went into liquidation amid lawsuits related to the project. In 2008 a joint venture including Japanese fund manager daVinci Advisors and Multiplex Developments (a Brookfield Australia subsidiary) bought the property, and Brookfield later bought out daVinci.
The Foundry started as a roughly $47 million mixed‑use project featuring 92 apartments, a 6,200‑square‑metre retail arcade over three levels and a multistorey underground car park. The site was bought for about $17.13 million in 2003, put on the market at a speculative $140 million in 2008, and was sold to the daVinci/Multiplex joint venture for $87 million.
Planning approval was granted to clear part of the site for a 39‑storey tower delivering about 60,000 sq m of office space and 3,700 sq m of retail. Brookfield Australia said no date has been set for construction and that discussions are ongoing with several large tenant groups to anchor the development, so timing remains uncertain.
Businesses progressively abandoned the complex. Anchor tenant IGA left, the Jamaica Blue cafe — one of only three shops open at launch — closed within three months with estimated losses near $400,000, and by early 2013 all tenants except the car park operator had departed. Remaining small businesses, like Eternal Addiction Tattoos, reported frustration and lack of communication about plans.
The Foundry highlights several warning signs: sellers or developers concealing occupancy or leasing data, building design or configuration that discourages foot traffic, persistent maintenance and amenity failures (escalators, toilets, cleanliness), and developer financial stress leading to liquidation. Verifying leasing records, inspecting customer access and amenities, and checking developer balance sheets can help manage risk.
Redevelopment approved for a large office tower with new retail could boost the site’s long‑term commercial prospects if anchored by major tenants. However, Brookfield has not set a construction date and is still negotiating tenant commitments, so any potential improvement for investors or local retail values depends on whether and when the project proceeds.
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