Better known for its lavish Palazzo Versace hotel, property developer Sunland Group has found a new craze with the launch of a $19.9 million unlisted property development fund.
The Sunland Diversified Land Fund is the first public offer of its kind for Sunland and the group is already signaling more series in the near future.
Sunland Funds Management is issuing 19.9 million units at an offer price of $1 per unit with the minimum investment amount of $20,000. Based on forecast, Sunland said the internal rate of return over the investment term of 2.6 years is 20%.
Investors in the fund will participate in the returns generated from the development and sale of the residential lots in three residential subdivisions located at Bushland Beach in Townsville, Clover Hill on the Gold Coast and Arbour on the Park in Burnside, Victoria.
The properties are part of Sunland’s existing land development portfolio and already have development approvals in place.
Sunland is not the first to foray into the unlisted property development fund sector, property giant Stockland has also launched the first in a series of residential land development funds for wholesale investors, SREEF1, which is expected to close shortly.
The $60 million Stockland Residential Estates Equity Fund No.1, is the first in a series of funds to be offered to wholesale investors.
Meanwhile, land developer Peet & Company recently raised $20 million for the Peet Cranbourne Central Syndicate – to develop a 64hectare of residential land in Melbourne’s rapidly growing south-east in Cranbourne.
The Peet Cranbourne Central Syndicate Limited is the 15th land syndication offered by the company since 1997.
Meanwhile, a recent Unlisted Property Funds Review by Property Investment Research found the unlisted property funds sector has continued to grow substantially in recent years. Sector growth to date has averaged 40% per annum over the last ten years, and the funds under management now exceed $17.1 billion.
The review forecast continued growing trends in investments in land subdivision funds, which are characterised by higher return profiles over generally shorter periods.
“Although not readily apparent, there is an emerging trend for managers to include development aspects into their funds as a method of capturing enhanced total returns.
“To date, such funds have been primarily in the office and retail sectors, although there have been some involved in residential as well,” the review found.
“Unlike most funds involved in development, investors here still take an equity position, rather than debt as seen in mortgage / mezzanine vehicles.
“These funds allow managers to secure properties earlier in their lifecycle and can provide enhanced returns providing development risk is mitigated and adequately compensated,” the review concluded.
By Kathryn O’Meara