FLEDGLING advisory and investment outfit Sirona Capital has forged a partnership with embattled property developer Luke Saraceni after buying two of his properties for its real estate investment business.
West Perth-based Sirona has bought a 270-hectare parcel of land in Bullsbrook and the Myer building in Fremantle from Saracen Properties in the past two months.
Joint managing director Matthew McNeilly, who heads Sirona’s property investment arm, would not disclose the acquisition price for either of the properties, which have both been funded through the formation of investment syndicates.
Mr Saraceni’s Saracen Properties will play a role in both of these projects, acting as development manager for the Bullsbrook industrial subdivision and development partner for the Fremantle project.
It’s understood Sirona worked closely with Mr Saraceni in a bid to re-capitalise the Raine Square project late last year before Bankwest and the Bank of Scotland appointed receivers to the city office tower project.
However, Mr McNeilly poured cold water on any suggestion Sirona was Mr Saraceni’s ‘white knight’.
“It just so happened that Raine Square led us to look at a number of other assets that he had,” Mr McNeilly said.
The Bullsbrook land was not part of the receivership but Sirona recognised the site’s potential for large industrial lots and the work to rezone the property is currently under way.
“We identified the shortage of large-lot industrial land in Western Australia and it was not lost on me that the whole of Forrestdale, Kewdale, Welshpool was all accounted for,” Mr McNeilly said.
“There seems to have been an effort to create a whole lot of industrial land to the south of the city but I look at the north-west and the mid-west and I question why our industrial land isn’t better located to the north-west of the metropolitan area.”
Sirona plans to break the property down into a series of super-lots, with the first stage focused on selling land adjoining the Great Northern Highway.
“It’s something we will develop out over the long term, we may look for a bigger partner; it may be of interest to a real estate investment trust or an institutional investor,” Mr McNeilly said.
The acquisition of the Myer property on Kings Square in Fremantle is a redevelopment project for Sirona, and with Myer’s lease expiry scheduled for mid 2012 there is still some uncertainty about the likely retail anchor for the property.
Sirona plans to scale down the major retail tenant in the building to a 10,000 square metre lease with up to 4,000sqm of specialty retail tenants and 5,500sqm of new office space.
“Myer has made some noises and said they are committed to Fremantle … but they are one of a number of options for us,” Mr McNeilly told WA Business News.
“We are analysing who we think is the best prospective tenant for a retail precinct in Fremantle.”
In addition to the redevelopment plans for the Myer site, the City of Fremantle has drafted a memorandum of understanding with Sirona Capital over the redevelopment of the broader Kings Square precinct, including the Queensgate buildings, the Fremantle Town Hall Centre buildings and the Kings Square public space.
The MOU has attracted some negative press, with Fremantle MP Adele Carles attacking the City of Fremantle for preparing to do a deal with a company with ties to Mr Saraceni.
The Fremantle site and the broader precinct are consistent with Sirona’s real estate investment strategy of identifying special assets that could benefit from the application of capital.
Its first two real estate projects are based in WA but Sirona is also exploring a number of investment opportunities on the eastern seaboard.
“The types of opportunities we are focused on are relatively higher returns, where we are able to mitigate risk,” Mr McNeilly said.
“Bullsbrook is a bit different; it is a rezone play and we have been pretty opportunistic in the price we have picked that land up for. We have identified there is a long-term industrial land shortage in Perth and think we can add value to that by getting it rezoned.
“We are attracted to what we define as special situations, more complex matters and ones where there might be opportunities for us to apply capital and that might be Mount Kellett capital, it might be our own capital or other people’s money and it tends to be a combination.”
Sirona provides consulting services to $US3 billion global private equity fund Mount Kellett, which was founded by two former senior equity partners from Goldman Sachs.
Sirona joint managing director Kelvin Flynn said the business acted as Mount Kellett’s exclusive sourcing and diligence arm in Australia.
“We will help from sourcing deal flow to the due diligence around those opportunities in Australia and they are there with capital and to also provide input. And they are the decision makers, ultimately,” he said.
“The industries we are focused on here at Sirona are metals and mining, energy and real estate and opportunistic and distressed investing … anything else that makes sense on the base of value.”
Sirona has not completed any deals in the mining, minerals or energy sectors since setting up in 2009, but Mr Flynn said it was happy to be patient and take its time to find the right opportunity.
“It’s about finding the right deal that makes sense,” he said.
