7 June 2020: Stirling Property Funds has made its third property acquisition, Junction Fair, a neighbourhood shopping centre in Newcastle.
The Stirling Junction Fair Fund (Fund) which settled yesterday on 16 June 2020 was acquired from Fortius Funds Management for $47 million.
Matthew Hyder, CEO of Stirling Property Funds, said we have employed a defined investment strategy of acquiring quality income producing assets that demonstrate compelling, relative value to other property sectors, which also stand to benefit from recent government infrastructure investment coupled with growing local demographics. This is consistent with Stirling’s earlier acquisitions in Macquarie Park and Liverpool, which are on target to deliver superior total returns for our investors.
A couple of elements were very attractive with this acquisition. First is the significant yield premium on offer relative to standalone supermarkets and second was the very strong relative value to office assets. As we continually assess new opportunities, we remain focused on assets that align with our value focused investment strategy.
Junction Fair, a dominant non-discretionary focused neighbourhood centred anchored by a Coles supermarket is located in The Junction, 1.5kms south of the growing Newcastle CBD, adjacent to Merewether Beach.
With 11,250 sqm and four street frontages, the site comprises 7,226 sqm of lettable area and 231 onsite car spaces, and boasts a trade catchment with 18% higher median income and 14% higher population growth than the Sydney metro.
Junction Fair’s non-discretionary and service-based tenants comprise 77% of the centre’s lettable area, with Coles, who has a lease to 2027 and 2 X 10-year options providing 50% of the centre’s income.
Matthew Hyder, CEO of Stirling Property Funds said Junction Fair demonstrated its strong non-discretionary nature during COVID-19, with April 2020 sales up 22% year on year and 91% of its tenants remaining open versus discretionary weighted shopping centres with just 37% of tenants open.
Mr Hyder said investors were attracted to Stirling’s investment strategy that seeks to deliver a strong total return of cash distribution and capital growth, underpinned by the robust tenancy base and security of income.
Mr Hyder wants to recognise the good working relationship experienced with Fortius enabling settlement to be extended in light of the COVID induced lockdown.
The Stirling Junction Fair equity raise of $25 million was oversubscribed and completed in just over 2 weeks.
Stirling Junction Fair Fund is forecast for four years providing investors with a total return forecast of 15.7% (IRR) and net quarterly cash distributions of 9.1% p.a.
Stonebridge Property Group’s Philip Gartland in conjunction with JLL’s Nick Willis, who negotiated the sale said this is a really encouraging result for the retail investment market.
“The asset exchanged in January 2020 and settled in June 2020, with the successful capital raising demonstrating that investor appetite for quality retail assets remains robust.”
“What COVID-19 has very much reinforced is the importance of non-discretionary retail and the important role that town centre assets have in serving the community and we are anticipating strong demand for this style of asset in the second half of 2020.”
In 2018, Stirling Property Group bought its first property at 2 Byfield Street in Macquarie Park for just over $15 million and its second property in October 2019 at 203 Northumberland Street, Liverpool for $47 million.