17th May 2018.
Sirona Capital, the developer of the $270 million Kings Square Fremantle, has bypassed the banks to strike a $190 million funding deal with First State Super and Altis Property Partners.
Under the four-year financing package, which does away with the need for a bank loan, First State Super will make its first direct foray into WA property, the fund’s head of real assets Damien Webb said.
First State Super has $90 billion in funds under management and a property hurdle rate of return of more than Australian inflation plus 5 percentage points after fees and charges.
It already has an extensive portfolio of office, retail and industrial assets but was increasingly investing in developing assets to capitalise on “this stage of the cycle”, Mr Webb said.
First State Super chief investment officer Damian Graham said the Kings Square Fremantle office, market hall and retail redevelopment, the fund’s first major WA investment, would form a “valuable” holding.
Kings Square Fremantle, being built by Probuild, is underwritten by a 15-year State Government lease on 17,000sqm of the 20,000sqm office across two buildings and will feature FOMO, an urban, retail food and dining market hall concept designed to showcase the creative- makers vibe of the port suburb. The project includes the multi-deck Queensgate carpark, with 830 bays, to be fully refurbished.
Sirona Capital managing director Matthew McNeilly said the “alternative credit market” — super funds and global private equity — won out over bank and “fund-through” options.
“It is almost inevitable that big funds and global private equity will want to move into the credit space,” he told WestBusiness, given big banks now had a “different risk appetite”.
In real estate development, credit was the “lifeblood” of activity, Mr McNeilly said, adding WA’s improving fortunes were a “great opportunity” for super funds contemplating fully valued east coast assets.
Altis Property Partners Paul Notaras said the “attractive risk-return profile” of the deal was the first under its mandate with First State Super.