St Hilliers Funds Management has contracted to sell its investment property at 496 Northbourne Avenue, Dickson to a local Canberra developer.

Greg Lyons, Managing Director of Knight Frank Canberra, introduced the two parties for the property deal.

The property, which is held in the St Hilliers Enhanced Property Fund No.1, has been sold for $11 million and settlement is scheduled for September.

The 6,090 square metre property, which comprises a four level commercial building with 3,950 square metres of nett lettable area and on-grade parking for 125 vehicles, was acquired by the Fund in 2003. The building is fully leased to Telstra until 31 October 2007.

St Hilliers Executive Chairman, Tim Casey said the sale of the property was deemed the best result for the Fund, which is a limited life fund.

"The Fund had earmarked the property for residential redevelopment in two to three years time. However, given the current residential market conditions and the expiry of the Telstra lease in 2007, the Investment Committee chose to take this opportunity to sell the property," Mr Casey said.

St Hilliers Enhanced Property Fund No.1 closed in December 2004 and has controlled property investments in Sydney, Melbourne and Canberra totalling $50 million. The Fund is a risk-adjusted closed-end vehicle with a six-year life span, targeting an internal rate of return of 15 percent per annum on drawn equity, before tax and net of all fees and Fund expenses. The Fund strategy is to invest in tenanted properties that provide an immediate income stream and then apply St Hilliers expertise to maximise the investment value of the property.

St Hilliers Enhanced Property Fund No.1 is the first of a series of unlisted property investment vehicles St Hilliers is proposing for the wholesale investor market.

A second enhanced property fund closed in 2006 with two industrial properties located in Sydney and Melbourne.

St Hilliers believes the enhanced property funds fill the gap in the market for products that seek a middle course between higher risk opportunistic development and passive ownership of long-term leased property. The enhanced property funds are designed to deliver strong returns with a blend of investment and development returns.

"We are confident that our product is attractive to the wholesale investor market and we are launching the third in this series of enhanced property funds having secured two seed assets with a third under due diligence," Mr Casey said.