Perth-based residential property investment company Aspen Group announced today it would launch two syndicates for residential land subdivision projects in Queensland and Western Australia.
Perth-based residential property investment company Aspen Group announced today it would launch two syndicates for residential land subdivision projects in Queensland and Western Australia.
The full text of a company announcement is pasted below
Aspen Group is pleased to announce that it has contracted for the management and cornerstone investment in two large scale residential land subdivision projects. The developments are located in the metropolitan region of Perth, Western Australia and the central coast growth corridor of Queensland.
The developments total in excess of 1,500 lots and together with the recently syndicated Dunsborough Lakes Estate take Aspen Group's total syndicated residential development pipeline to approximately 3,000 lots.
Consistent with its co-investment strategy Aspen Group will take a cornerstone interest in each syndicate and have the project management, corporate services and selling rights for both developments.
Whitsunday Shores Estate, Bowen QLD
This residential development is situated on the central coast of Queensland and covers a total area of 269 ha, which will include an 18 hole golf course.
Located between Townsville and Airlie Beach, the estate offers expansive elevated ocean and hinterland views and water frontage; and benefits from its exposure to the resource boom and its history of quality agricultural production.
With 669 lots to be sold over the estimated project life of 11 years, the estate currently has stock available for sale, giving immediate cash flow and ensuring investors receive the earliest possible return on their investment.
The project will require equity of $20 million and will be syndicated to the sophisticated investor market in a similar fashion to the successful Dunsborough Lakes Estate. Aspen Group will retain a 25% cornerstone investment to align its interests with that of the syndicate investors, with the vendor also remaining in the development with a 25% share.
In addition to the estimated 20% internal rate of return on its investment, Aspen Group will earn the additional fund management fees for project management, sales and marketing and corporate services. The net fund management fees of approximately 7.5% of the gross sales value of the project are incentivised by a performance fee of a 50% share of profits in excess of a project IRR of 15%.
Swan Valley Estate, Perth WA
Located in the Swan Valley region, approximately 16 kilometres from the Perth CBD, the Swan Valley estate project comprises a substantial land holding of 76ha. Additional contiguous acquisitions of approximately 20ha will further consolidate the estate's design into a significant master planned residential community comprising well in excess of 1,000 residential lots.
The land is zoned 'Urban' under the Metropolitan Region Scheme and is currently going through the relevant planning approvals process.
Surrounded by the developing residential estates of Ellenbrook, The Vale and Bennett Springs, the site is ideally located within the high-growth eastern development corridor at the gateway to the Swan Valley.
The project was established prior to Aspen's entry into the residential development sector, through a private entity owned by executive directors Mr Del Borrello and Mr Hawkins. Aspen Group has acquired from this entity the rights to manage the project for a cash consideration of $6 million. The rights cover project management, sales and marketing and corporate service fee income. The net fund management fees of approximately 7% of the gross sales value of the project are incentivised by a performance component of a 25% share of profits in excess of a project IRR of 20%.
The assumptions underlying the Aspen fee stream valuation were based on a gross average lot sale price of $170,000. The recent achievement of comparable residential lot sales in excess of $220,000 provides significant support for the reasonableness of the valuation assumptions.
Aspen Group will also acquire a cornerstone interest in the development syndicate of approximately 10% for a consideration value of $2.4 million on the same terms and conditions as other third party participants. A robust due diligence conducted by the non-executive directors, which included an independent accountant's report by PKF and a property valuation report by Jones Lang LaSalle, supported the conservative consideration value of the equity participation and fee income streams.
Growth of Residential Funds Management Division
Mr Del Borrello commented that both estates are very well positioned to capitalise on the current and expected future market conditions. He noted "the different stages of progress that the developments are at ensure consistent management income for Aspen Group immediately and into the future."
Aspen Group has established itself as a significant participant in the residential property sector, through its syndicated property development model. In a short period of time Aspen has grown a significant pipeline of 3,000 residential lots with a forecast total realisable sales value of $1 billion across all of the development projects over the next 10 years.
With Aspen's net management fees of approximately 7.0% - 7.5% and future project performance fees, Aspen is well placed to continue delivering significant returns to its shareholders going forward.
Underpinning the confidence that the executive directors have in Aspen's outlook, Mr Del Borrello confirmed that both he and Mr Hawkins had recently exercised the unlisted stapled options they held in Aspen Group.
