Developments in syndication

The Mirvac Group made its first move into land syndication in Western Australia last week, highlighting the growing trend among property developers of using syndicates to complete projects.

Mirvac is seeking to raise $12.8 million through wholly owned subsidiary James Fielding Funds Management, for the Seascapes residential development in Mandurah.

The project has been developed and marketed by Mirvac Fini since 2001, and Mirvac Fini will continue to develop and sell the 528 lots on behalf of the fund, The land was bought for $30 million, and the rest of the project will be funded by debt.

Mirvac Fini CEO Adrian Fini told WA Business News that moving the Mandurah land into a fund would enable capital to be used more effectively.

“We are increasingly focusing on our built-form product, and we can better focus on the built form area by utilising capital from the land syndication model – it is just a more effective use of capital,” Mr Fini said.

In a statement to the Australian Stock Exchange, the Mirvac Group said this was: “the first of a series of funds which will provide investors with the opportunity to share in the rewards of quality property development projects identified and managed by the experienced funds management and development teams within the Mirvac Group.”

Mirvac Group managing director Greg Paramor said the project was consistent with the group’s strategy to build on its integrated property platform and expand earnings by syndicating selected development assets through funds management activities.

Forecasts of approximately 18 per cent in annualised pre-tax investor returns are expected for the fund during the forecast period.

The project is scheduled for completion by the end of 2009 and the fund will be wound up in mid-2010.

Listed WA developer Peet and Company currently leads the syndication market, and has been syndicating for at least the past 50 years.

Peet managing director Warwick Hemsley said Peet currently had 25 syndicates under way, and had undertaken more than 35 during the past decade, raising hundreds of millions of dollars.

“Peet and Co traditionally has pursued syndication as a way of allowing retail investors to participate in a sector that is dominated by institutions and developers,” Mr Hemsley said.

“It is a capital efficient way to be involved in the property development industry and just one of the ways to fund broad acre land development, which is a capital intensive business.”

Peet’s most recent syndicate, Peet Cranbourne Syndicate Limited, is seeking to raise $16 million for a 66-hectare residential development south-east of Melbourne.

Peet currently has syndicates in WA, Victoria and Queensland.

Multiplex entered the syndicate market in August this year with the Multiplex Acumen Vale Syndicate, a $30 million capital raising for a 208ha development at Ellenbrook.

The Vale project is expected to produce more than 1,500 lots, and be wound up in late 2009, with Multiplex forecasting an annualised pre-tax investor return of 20 per cent.