Investment group CVC and Trinity have revived an inactive property fund and the joint partners have grand plans for it.
Trinity has bought a 50% stake in CVC Property Managers, the responsible entity for the listed Taragon Property Fund and as part of the deal, the fund will be jointly managed by Trinity and CVC and renamed the CVC Trinity Property Fund.
CVC bought Taragon in December last year and in March this year sold its sole asset, the High Wycombe Land in Perth for $1.63 million.
CVC and Trinity will now kick start the fund with a bulky goods development in Belrose, Sydney.
The project will be developed into a 14,157 sqm retail bulky goods development site in the Austlink Business Park for $15 million and is expected to have an end value of approximately $60 million.
CVC’s executive director Geoff Leaver said CVC Trinity Property Fund has laid dormant since the group acquired it.
“It is time to rev up the fund and we have identified a mix of development projects and non-development assets, which are completely passive type of investments to provide recurring funds,” he added.
Leaver said while development assets are higher risk, they do provide potential to add capital value.
“We have not secured a tenant yet for the bulky goods centre but we are going ahead with construction. The adjoining and much larger homemaker centre started construction without any tenants and by the end of construction – it was fully leased.
“We will undertake a capital raising to buy the land and borrow funds for the construction of the facility. We have a borrow ratio of 40% and we are planning a $50 million capital raising next year,” he added.
Leaver said the fund has a targeted funds under management of $200 million, which he expects to achieve in the next two years.
And Leaver is confident of achieving that goal, adding that in addition to the Belrose property the fund has already identified two commercial investments, which will bring take funds under management to $100-$150 million by mid next year.
“And in early 2008, Belrose will be complete with a value of $60 million,” he added.
Leaver said the fund will initially invest in the eastern seaboard and has set it sights in Brisbane, Sydney and Melbourne, but he has not ruled out major rural centres such as Ipswich.
Our target assets are properties that are between $25-$40 million.
Trinity’s chief executive Ben McCarthy said the CVC Trinity Property Fund will be the first external fund managed by Trinity and recognises the group’s ability to grow funds and the portfolio.
“CVC will be responsible for the fund’s compliance and administration while Trinity will identify investment opportunities and assume the ongoing property management of the assets,” he added.
McCarthy said that Trinity’s interest has a separate responsible entity to the group’s existing entity, Trinity Funds Management Limited. The additional funds management fees will contribute to maintaining 70% recurrent income for the group’s earnings.
Trinity has a clear growth strategy to have $1 billion of funds under management by 2009 and generate at least 70% of Group earnings from recurrent rent and fees.
By Nelson Yap
