Australian Defence Housing Authority Enters $97 Sale Leaseback of 178 Houses

The Australian - April 05, 2006

WESTPAC Funds Management plans to launch Australia's first residential property trust after buying $97 million worth of property from the housing arm of the Australian Defence Force. The Defence Housing Authority sold the 178 houses to WFM under its sale and lease-back program, on lease terms ranging from nine to 12 years. Westpac also said it was in preliminary negotiations to buy a further $300 million of residential property from the DHA.

The DHA typically develops housing for members of the defence force and then sells those properties to retail investors on a sale and lease-back basis. Half of the houses were located in Sydney with the remainder split between southeast Queensland and the ACT. Westpac Specialised Capital Group general manager Sean McElduff said the group planned to take the residential property trust to the market within three months but had not yet decided whether it would be listed. "Residential REITs are a well-developed asset class in the US and we believe such an offer will be well received by Australian investors," Mr McElduff said.

Mr McElduff said the purchase was a long-term play counting on capital appreciation, with properties bought on a gross yield of between 3 per cent and 4 per cent. The DHA whas agreed to re-paint and re-carpet properties when leases expired and fix any broken appliances for the duration of the tenancy. The WFM sale was the first time DHA properties had been sold to non-retail investors. Sphere: Related Content