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Eureka Group Holdings (ASX: EGH) has acquired a portfolio of six seniors’ rental villages in Western Australia for $44 million from lifestyle and holiday communities park developer and operator Ingenia Communities Group (ASX: INA).
The move will see Ingenia offload its entire Ingenia Gardens portfolio in WA as part of a $70 million recycling of assets this financial year.
The deal with Eureka was struck at a premium of more than 14 per cent to Ingenia’s June 2023 book value of $38.4 million for the assets.
Gold Coast-based Eureka Group has acquired the seniors’ villages through Eureka Villages WA Fund, a new wholesale property fund that the company is managing.
The fund is raising $28.5 million from professional and wholesale investors, including a $5 million cornerstone investment from Eureka, along with a stand-alone debt facility of $21 million to fund the acquisition.
The villages, located in Perth, Mandurah, Bunbury and Albany, comprise a total of 321 units with occupancy sitting at more than 98 per cent.
It is a deal that will boost Eureka’s portfolio of owned and managed villages to 52, totalling 2,872 units across Australia.
Eureka’s executive chairman Murray Boyte says the acquisition firms up 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,” Boyte says.
“This transaction demonstrates Eureka’s ability to access alternative forms of capital which are necessary to grow the business.”
The sale of the seniors’ villages is expected to settle in early December.
Ingenia CEO Simon Owen says the sale is consistent with the group’s review of its portfolio to recycle capital.
“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,” Owen says.
“It is pleasing to see the Gardens communities transact on capitalisation rates of circa 8 per cent, indicative of our long-held view that this asset class remains mispriced.
“The sale proceeds will be deployed across our growing pipeline of opportunities in the lifestyle business as we continue to progress our established projects to create sustainable, high quality communities.”
Eureka says the weighted average capitalisation rate of 8.4 per cent is in line its broader property portfolio which was valued at $228.5 million at the end of June.
The company says the acquisition will be earnings-per-share accretive immediately, strengthening Eureka’s income streams and FY24 outlook.
Eureka Group posted an after-tax profit of $19.2 million in FY23 following a 22 per cent lift in revenue to $36.4 million.
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