Following the recent oversubscribed close of its Core Plus Fund (CPF), FKP Funds Management will continue targeting CBD ‘fringe’ and industrial properties, avoiding CBD core acquisitions in an attempt to outperform.
Statewide Superannuation Trust and First Estate Capital Partners Enhanced Income Fund were among the 17 institutional investors who committed capital to CPF, which closed last week at $136 million, exceeding its targeted close of $100 million. Adam Learmonth, FKP Funds Management executive general manager, said CPF “focuses on the end of the market that is largely ignored, the small assets that need hard work. They’re the gems in the office and industrial area”. Using a 50 per cent gearing ratio, CPF now targets $272 million worth of assets, primarily well-positioned and distressed industrial, office and metropolitan convenience property which it aims to re-develop. Such property, typically found on the fringe of the CBD and in outer suburbs, would be bought in preference to increasingly exclusive core property. “That’s the theme across all our assets,” Learmonth said. “;If the right opportunity came along, we’d buy in the CBD, but we’re unlikely to get a return in the CBD.”; Learmonth said the fund aims to generate a 10 per cent internal rate of return over six years, which would be “;hard to do with passive core CBD assets”;. In a joint venture with parent company FKP Property Group, the fund is developing two Melbourne industrial properties it expects will attract logistics operations: Metrolink Business Park, Campbellfield, and Eastlink Business Park, Carrum Downs. Learmonth said the Campbellfield and Carrum Downs developments should appeal to logistics operations since they are in close proximity to the Hume Highway and Mornington Peninsula Freeway respectively. “If you look beside freeways, follow the zoning, it’s not rocket science. When a freeway is announced, it takes a while for land values to catch up,” Learmonth said. The fund was launched in December 2005 with three core assets in Sydney, Melbourne and Brisbane. In September, it settled an office acquisition on Brisbane’s Coronation Drive and expects to settle another office acquisition in Broadway in January 2007. The fund’s seven properties in Sydney, Melbourne and Brisbane account for 50 per cent of its capital.
Some of Australia’s biggest asset owners are expanding their stocks and bonds lending activities in a push for improved returns by leveraging on significantly bigger balance sheets. This reflects funds’ increasing scale and global outlook, and reverses a pullback seen during the GFC and, later, during the COVID-19 pandemic.
Prashant MehraDecember 4, 2024
