This article is from the Australian Property Journal archive
EUREKA Group Holdings is acquiring six seniors’ rental villages in Western Australia from fellow ASX-listed company Ingenia Communities Group for $44 million.
The villages are located in residential areas of Perth, Mandurah, Bunbury and Albany and in total comprise 321 units, with occupancy exceeding 98%.
They are being acquired by a new Eureka-managed wholesale property fund called Eureka Villages WA Fund. Post-completion, Eureka’s portfolio will comprise 52 owned or managed villages, totalling 2,872 units across Australia.
Eureka executive chairman, Murray Boyte said, “We are very pleased to have secured this excellent portfolio that establishes Eureka’s position as a national leader in the affordable build-to-rent sector.
“The portfolio has been well managed by Ingenia, delivers scale to Eureka, and is supported by the existing overhead base. This transaction demonstrates Eureka’s ability to access alternative forms of capital which are necessary to grow the business.”
The transaction marks another step in Ingenia’s non-core asset divestment program, coming hot on the heels of the sale of a Hervey Bay site for $11.5 million and the leasehold of a holiday park on the NSW South Coast for $7.1 million. It is on track to recycle $70 million of assets in FY24.
“We continue to focus on portfolio enhancement and scale as well as the delivery of operating efficiencies and these divestments are in line with this objective,” said Ingenia’s CEO, Simon Owen.
“It is pleasing to see the Gardens communities transact on capitalisation rates of circa 8%, indicative of our long-held view that this asset class remains mispriced.”
The Western Australian portfolio has been independently valued at $44 million. The weighted average capitalisation rate of 8.4% is in line with Eureka’s property portfolio, which was independently valued at 30th June.
The new Eureka fund will acquire the portfolio and fund the associated transaction costs using equity and a stand-alone debt facility of $21 million. It is raising $28.5 million from professional and wholesale investors, including a $5 million cornerstone investment from Eureka.
Completion of the transaction is due to occur in early December.
Another wholly owned subsidiary of Eureka has been granted the right of first and last refusal to acquire the portfolio from the fund after 3 years.
The fund will have an initial three-to-five-year term and will provide a forecast starting distribution yield of 8.0% per annum, paid quarterly.
Eureka said the acquisition is immediately earnings per share accretive for Eureka and strengthens Eureka’s income streams and FY24 outlook.
“During FY24, Eureka expects continued growth in maintainable earnings, like-for-like growth in revenue and underlying EBITDA, strong contributions from prior year acquisitions and the Brassall development in Queensland and continued high demand with occupancy at 98% or above,” it said.
