St Hilliers Funds Management Limited has boosted the portfolio of its recently launched St Hilliers Enhanced Property Fund No. 1 with the acquisition of a fourth property.

The latest acquisition, a 2.5 hectare industrial site at 25-37 Huntingdale Road, Burwood was purchased for $12.3 million. The property is the Fund's second in Victoria, with the remaining two properties located in Sydney and Canberra.

With the settlement of Huntingdale Road, the Fund, which closed in December last year, has now drawn 80 percent of its subscribed equity. The Fund allows a gearing level of 65% so with the committed equity of $23.6 million the Fund could have total assets with a value of $65 million. The four properties the Fund has already invested in have a combined book value of $40.8 Million.

St Hilliers Chief Executive Officer, Matt Joyce said, "We were pleased with the market's response to the fund and are on track to deliver our targeted return to investors. The Fund has received a lot of support from the wholesale investment community, with wholesale investors and their advisors finding it very attractive.

St Hillers Enhanced Property Fund No.1 is an unlisted property investment vehicle designed to deliver attractive returns to wholesale investors with a blend of investment and development returns. The market niche being targeted by the Fund is medium size property over the medium term. The investment objective is to seek a middle course between higher risk greenfields development and passive ownership of long-term leased property.

The Fund's 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 via refurbishment, redevelopment or repositioning in the marketplace.

Mr Joyce said the Huntingdale Road acquisition fitted neatly within this strategy and met the investment criteria of the fund. It is currently tenanted on short term leases, has a high profile location and has significant enhancement potential.

The 2.5 hectare Huntingdale Road site currently houses a 14,898 sqm office/warehouse/distribution facility and also has a vacant portion of land at the site's rear. Key tenants include: Gordon and Gotch, Tech Pacific and Hansen & Yuncken.

According to Mr Joyce, "This property offers a number of enhancement options."

"The site provides the opportunity to refurbish or redevelop the existing facility to enhance the property's value and increase future income streams," Mr Joyce said

"Another option we are considering is to develop the entire site, including the vacant rear of the site, either for a single purpose user or to offer a development of individual strata titles.

The St Hilliers Enhanced Property Fund No 1, a closed end vehicle with a six year life span, is expected to be the first in a series of similar funds with the launch of the second fund anticipated to be late this year.

The Fund, which received total subscriptions of $23.6m from eleven wholesale investors, is targeting an internal rate of return of 15 per cent per annum on drawn equity, before tax and net of all fees and Fund expenses.

The newly acquired Huntingdale Road property is the Fund's fourth asset. The three seed assets comprise

• A 6,070 sq m site at 496 Northbourne Avenue, Dickson, ACT. The site contains an office building which has 3,951 sq m of net lettable area which is leased to Telstra until October 2007
• A 4,173 sq m office building located on a 2,120 sq m site at 119 Wells Street, Southbank, Melbourne. The property is leased to Channel 7 until December 2007
• An 85% interest in an industrial property at Lot 2, 1 Box Road, Taren Point, Sydney which is leased to Haworth Australia until October 2006. The property comprises an 11,983 sq m factory/warehouse building on a 17,180 sq m site.

St Hilliers and Westpac Institutional Bank are both cornerstone investors in the Fund. The Manager, St Hilliers has a proven track record in sourcing, managing, developing and marketing quality properties. The Fund has exclusive access to St Hilliers deal flow

St Hilliers Executive Chairman Tim Casey said "We are excited to have the Fund up and running and we are looking forward to applying all the experience and expertise of St Hilliers for the benefit of the Fund's investors.