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Fortius syndicate pays $32m for Junction Fair turnaround

Friday, October 02, 2015

A syndicate arranged by Sydney funds manager Fortius has bought the ­Junction Fair Shopping Centre in Newcastle for almost $32 million.

Fortius expects total returns from the value-add investment to be in the mid-teens from rejuvenation and repositioning.

The vendor is the AMP Property for Income Fund, which is undergoing an orderly sale of assets after a 2011 ­decision to wind up the fund.

Junction Fair is the neighbourhood shopping centre closest to central ­Newcastle. Its catchment includes the affluent neighbourhoods of Cooks Hill, Merewether and Hamilton South.

The centre has an area of 7244 square metres and is anchored by a recently refurbished full-line Coles Supermarket and includes 25 speciality stores and parking for 200 cars.

But several shops are empty and 24 per cent of the centre, by income, is vacant. The passing yield is 6.7 per cent.

Fortius estimate the centre could generate close to a 10 per cent yield when new leases are locked in, the ­centre is reconfigured and a new ­tenancy profile is established.

The plan is to actively manage the centre, and remix the tenancy profile with an emphasis on fresh food and non-discretionary spending.

Fortius manager, syndication and separate accounts, Sam Sproats, said Junction Fair was under-performing but was a fundamentally sound ­neighbourhood shopping centre with an excellent demographic. Our active asset management and leasing ­experience will be well suited to turning this asset around.

Agents, Stonebridge and Street ­Property Group, handled the sale.

Fortius has about $800 million in property funds under management.

Investors include larger institutional investors, offshore groups and professional and sophisticated investors.

The Junction Fair syndicate will be geared to about 50 per cent and will aim for a five-year life based on the ­turnaround in the centre.

Neighbourhood centres, with their focus on non-discretionary spending have been keenly sought with yields in the low 7 per cents and heading lower.

Robert Harley

Australian Financial Review

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