Croydon Update

ResiFund’s Croydon property in Melbourne increases in value, with potentially far more to come.

We have just revalued our property in Croydon, Melbourne, which has increased in value by $100k or 5.3% to $2m.

This is a very good result as it provides a sufficient increase to offset the stamp duty costs incurred at last year’s acquisition, as well as contributing additional capital growth for investors with a higher unit price (now $1.2442 as at 1/9/23).

The increase in value partly reflects the Manager securing a Development Approval (DA) to build 16 townhouses on the site, to replace the current four old townhouses.

A redevelopment of the site could significantly enhance the returns and diversification for investors. It is currently anticipated that we would build and lease eight new townhouses and sell the remaining eight.

The Croydon market is very well positioned for this, with average vacancies at just 0.5% as at Aug 2023 and with asking rents on units having increased by nearly 20% in the year to 12 September 2023 (Source SQM).

While we still need to finalise the costs of such a redevelopment, based on our preliminary assessment we believe this should generate significant capital growth for our investors through both the properties we build and lease and those which we sell. It should also provide an additional 4 tenants which would increase our total number of tenants to approximately 40 and generate further rental income for investors.

If we do progress with the Croydon redevelopment, we will first secure a building contract and then have the property valued on an “as if complete”. That will provide us both further comfort regarding managing risk as well of the expected profitability before we start a redevelopment. It would also allow investors to benefit more quickly from the project, by allowing us to progressively accrue expected capital growth through higher unit prices during the redevelopment phase, rather than having to wait for profits once complete. We are hoping to commence the construction phase in early 2024.

We see Croydon as an excellent example of the additional returns we are trying to generate for our investors over the next few years, by seeking to maximise the value of each of the properties and we look forward to all our investors sharing in those potential returns.

We are also anticipating being able to have a similar opportunity for our property in Camberwell, Melbourne, which would likely be redeveloped from currently three older townhouses to a total of around 10 apartments. Similar to Croydon, we are also anticipating we would build and lease some of these new properties, while selling others.