St Hilliers raises $200 million with development to core fund

The cornerstone investors, REST (Retail Employees Superannuation Trust) and First State Super have committed to the $200 million in the open-ended wholesale fund and will participate in the development process effectively accessing the portfolio at cost rather than market price. St Hilliers will co-invest in the Fund to demonstrate its alignment with the cornerstone investors.

In announcing the successful closure of the Fund, St Hilliers Property Chief Executive Officer, Tim Casey said this was the company’s largest equity raising to close and would produce property investments with a gross end value approaching $500 million.

The Fund is for an initial seven year term with provisions to extend. Accrued development profits will be reinvested into the relevant asset together with further equity to reduce gearing to core levels.

St Hilliers General Manager – Funds Management, Nicholas Ridgwell, said:
“This Fund is a demonstration of our commitment to longterm strategic relationships with like-minded organisations, which has been a basic tenet to the way we conduct our business.”

“REST and First State Super will capitalise on St Hilliers expertise in managing the total process of delivering investment grade development assets. We are cashed–up, ready to take advantage of opportunities in the marketplace that fit the Fund investment criteria of commercial office, industrial, bulky goods and retail assets ranging in size from $25 – $150 million,” he said.

Prior to closing the Fund, St Hilliers secured two developments potentially for the Fund. They are a 28,500 square metre commercial building at 88 Talavera Road, North Ryde and an 18,500 square metre commercial office building at 127 Argyle Street, Parramatta.

On completion the assets are forecast to have an aggregate value in the order of $250 million.

St Hilliers recently wrapped-up its first closed-end fund, St Hilliers Enhanced Property Fund No.1, reporting a final return to investors of approximately 17.5 per cent per annum after fund fees and expenses including performance fees. The return substantially exceeded the Fund’s original target of 15% per annum after performance fees and expenses. St Hilliers Enhanced Property Funds No.2 and No.3 also offer target returns of 15% pa to wholesale investors.

The strategy for these three funds was to invest in a range of tenanted properties to provide an immediate income stream with St Hilliers applying its property expertise to maximise the investment value of each property. Fund No.1 managed five property investments valued in excess of $65 million, while Fund No.2 and Fund No.3 have development assets in Sydney and Melbourne valued in excess of $140 million. Fund No.3 still has over $25 million in equity to invest in suitable assets.

St Hilliers future fund offerings are expected to comprise a residential property development fund recognising the potential undersupply in Australia’s major eastern seaboard cities.

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Marc Pallisco

A freelance property analyst and journalist, Marc is a co-founder of realestatesource.com.au.

Marc Pallisco

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