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Fortius targets $160m Barracks site

Monday, October 15, 2018 Fortius Funds Management is planning to purchase a major mixed-use complex in Brisbane, known as The Barracks, from financial services company Challenger in a deal worth more than $160 million.

The deal would be a profitable exit for Challenger’s life unit, which bought the asset in late 2014 and then poured more capital into it, taking its commitment to about $153.9m.

Fortius is now offering wholesale investors the opportunity to invest in its unlisted Fortius Brisbane Barracks Trust, telling them it would acquire the asset at 61 Petrie Terrace on the edge of the Brisbane CBD once it has completed due diligence.

The mixed-use property is 90.4 per cent leased to office and retail tenants, with a weighted average lease expiry of 5.3 years.

Challenger acquired The Barracks for about $143.95m from developers Property Solutions and QM Properties and then invested in remixing the office and retail components of the property.

Fortius said there was still “upside from a successful repositioning of the centre and leasing up of the vacancies, particularly from the historic Barracks building”.

“Many of the value-add opportunities we look for are evident at The Barracks and we believe the investment will respond to Fortius’s initiatives and hands on management,” the group said. Fortius told prospective investors it was targeting forecast average distributions of 8 per cent over the five-year life of the trust, with an estimated internal rate of return of 16 per cent.

CBRE’s Flint Davidson and Joe Tynan and Colliers International’s Don Mackenzie are handling the deal.

Property Solutions and QM Properties transformed the site, which sat derelict for nearly 20 years, into a landmark retail and commercial precinct. Their project, completed in 2008, was one of the largest adaptive re-use projects undertaken on Brisbane’s heritage-listed buildings, and could be further improved.

The redevelopment of the former Police Barracks on Petrie Terrace now includes cinemas, a retail centre, an office component and restaurants.

Fortius has been active in investing in retail property. It bought the Home HQ Artarmon homemaker centre in Sydney’s northern suburbs from US private equity house Blackstone for $140m.

In that case, it won the backing of both global heavyweight BlackRock and the listed URB Investments.

Fortius last year purchased an office tower in Sydney’s Goulburn Street from Singaporean developer Roxy-Pacific Holdings in a $158m play.

Fortius bought that tower with the backing of Singapore-based SC Capital Partners Group. The pair also bought Sydney’s Bligh House from Cromwell Property Group for $68m in 2015 and have since submitted development plans.

Retail-related assets are trading strongly in Queensland, with SCA Property Group also snapping up the Miami One Shopping Centre on the Gold Coast for $32m.

The sale was handled by JLL’s Jacob Swan and Sam Hatcher on behalf of vendor, Hambros Pty Ltd.