The St Hilliers Enhanced Property Fund No.1 has exchanged contracts to acquire a fifth property, which sees the unlisted property investment vehicle fully allocated well ahead of schedule.

The Fund's Chief Executive Officer, Matt Joyce said: "We are particularly pleased to close the allocation phase of our first fund with the purchase of this property and we are now working towards presenting a second fund to the marketplace in early September."

The property is located in Melbourne and is leased for five years with a further five year option representing a rental yield of 13 percent. Settlement is scheduled for August.

Launched in late 2004 the Fund, a risk-adjusted closed-end vehicle with a six year life span, targeted 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, which closed in December 2004, will have property investments totalling $50 million and is the first in a series of enhancement funds St Hilliers is proposing for the wholesale investor market.

The Fund is an investment vehicle that fills 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 Fund's strategy is to invest in tenanted properties that provide an immediate income stream and then apply St Hilliers property expertise to maximise the investment value of each asset via refurbishment, redevelopment or repositioning in the marketplace. Investments with a potential end value of between $20 and $100 million when sold after repositioning are included in the Fund.

"The Fund has been designed to offer investors higher risk-adjusted returns from their property allocation than a passive holding in property, with the opportunity for significant capital gain. The risk is not as high as a development fund and there is a good coupon return in the short term," Mr Joyce said.

The four other assets of the St Hilliers Enhanced Property Fund No.1 include:

• A 6,070 square metre property with a four storey commercial office building at 496 Northbourne Avenue, Dickson ACT, leased to Telstra until October 2007;
  
• A seven level commercial building at 119 Wells Street, Southbank, Melbourne, leased to Channel 7 until December 2007;
  
• An 85 percent interest in an industrial property at Lot 2, 1 Box Road, Taren Point, Sydney which is leased to Haworth Australia until October 2006; and
  
• A 2.5 hectare industrial site at 25-37 Huntingdale Road, Burwood, Victoria. Key tenants include Gordon & Gotch Australia Limited, Hansen Yuncken Pty Ltd and Tech Pacific Australia.

Executive Chairman of St Hilliers, Tim Casey said that with the St Hilliers Enhanced Property Fund No.1 Fund having acquired its full complement of properties future strategies for each property are being investigated.

"St Hilliers has an established track record in property development and construction and the investors in this Fund will benefit from our experience and ability to effectively control costs and manage property enhancement programs," Mr Casey said.