Stirling Enhanced Yield Fund13 May 2021
Stirling has launched the Stirling Enhanced Yield Fund with a capital raising target of $200m of capital for investments in outer metropolitan, regional and secondary CBD markets where higher yielding assets and strong population growth are evident.
The Fund aims to provide Unitholders with an average net cash distribution yield of between 6.5%–7.5% p.a. over the term of the Fund, growing at a target 3.0–4.0% p.a., with a target net Internal Rate of Return of 9.0–11.0% p.a.
Stirling aim to achieve this by investing in a diversified portfolio of investment grade commercial property assets in high growth, accessible Regional Cities and areas within Capital Cities benefitting from long term demand drivers as a result of decentralisation, improved infrastructure and onshoring of economic activity.
The Fund is classified as a registered scheme with ASIC, the Fund will then be open to an unrestricted number of Retail Client Investors, along with a reduced minimum investment amount.
|Trustee / Responsible Entity
|Stirling Property Funds Limited
|Stirling Property Funds Limited
|Perpetual Corporate Trust Limited
|Fund Size Target
|$5.8m to $200m
|Fund Raising Close
|Rolling 4 Year terms
|Initially 6.5%–7.5% pa
|Total Target Return
|9.0% – 11.0% Net IRR
|Illiquid with a 4 yearly redemption window
|Wholesale and Restricted Retail Allocation
* 9 & 11 Channel Road, Mayfield West offering a 6.2% initial yield.
Other commercial assets in Newcastle, Hunter region, Wollongong, Central Coast, Western Sydney, Geelong, Ballarat, Bendigo, South East Melbourne, Brisbane, Gold Coast, Ipswich, Sunshine Coast, Canberra
The Fund’s Investment Strategy is to invest in a diversified portfolio of investment grade commercial property assets in high growth, accessible Regional Cities and areas within Capital Cities benefitting from long term demand drivers as a result of decentralisation, improved infrastructure and onshoring of economic activity. Stirling believe that these long term demand drivers are generating robust population growth, strong tenant demand and rental growth.
Stirling seek to capitalise on these long term demand drivers and the 30% return premium offered by investment grade commercial properties in highly accessible Regional Cities compared to returns for similar quality assets in Capital Cities provide for a very strong value proposition. Stirling will also implement the Manager’s active asset management strategy to generate a stable and growing income return contributing to capital growth.
The Fund’s seed assets are ;
- 9 Channel Road, Mayfield West comprises a land area of 8,763 sqm with a Gross Building Area (GBA) of 3,679 sqm. The improvements comprise a high bay clearance warehouse with minimum 11.5 metres clearance and functional two level office accommodation. Access is via numerous, container sized roller shutter doors.
- 11 Channel Road, Mayfield West comprises a land area of 5,472 sqm with GBA of 1,759 sqm. The improvements comprise a high bay clearspan warehouse with minimum 12 metre clearance and functional two level office accommodation. Access is via numerous, container sized roller shutter doors.
The Seed assets were acquired for a combined $9.92m, reflecting an initial yield of 6.2%. Stirling have obtained debt funding from the CBA on a LVR of 48% (Covenant 60%) and a rate of 1.85% over 90 day Bank Bill Rates. The net income of the assets is forecast to grow by Greater of CPI or 3% per annum, providing a distribution yield of 7.9%.
Stirling have also negotiated terms to acquire;
- 555 Kessels Road, MacGregor QLD – a large format retail centre 11kms south of Brisbane. The Centre is valued at $42.2M based on a 5.75% cap rate. The property is 90.6% occupied with The Good Guys as an anchor tenant.
The Manager is entitled to receive fees in consideration for the management of the Fund. In accordance with the Fund Constitution, these fees are summarised as follows:
- Proponent fee: equivalent to 1.5% (plus GST) of a property purchase price
- Management fee: equivalent to 0.75% p.a. (plus GST) of the Fund’s gross property value
- Expenses: estimated at 0.15% of the GAV (plus GST) of the Fund
- Performance fee: 15% in excess of an IRR of 8% p.a. measured every four years at each Fund Liquidity Event
The above fees generally align with market practice.
The Fund is recommended for further consideration by investors seeking an above average distribution yield. Capital growth in the fund may be limited for these assets and investors are advised to review the key risks in the product documentation.
Disclaimer: The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.