Aland Equity Group Targets $32m Annual Income from Chinnerys and Cowra Developments

Aland Equity Group (ASX: AEG) has extended the capital-light property funds model established at the Elm Grove Heights residential development in New South Wales to its wholly owned fund for the nearby Chinnerys and Cowra villa estates.

The model will apply to approximately 3,200 lots within the Chinnerys precinct, along with the 107-dwelling Yarrabilly land lease community at Cowra.

That means Aland will not need to acquire the underlying land upfront, avoiding stamp duty and associated costs while preserving the fund’s 30% gross profit margin.

Instead, the Chinnerys and Cowra land will remain with respective owners Share Star Holdings and Southern Rural Holdings until settlement with the final buyer of each residential lot, with amounts owing to the landowner to be paid from settlement proceeds.

Modelling Elm Grove Heights

AEG Funds will use project debt facilities to principally fund the costs required to complete and sell each stage of each development.

This is a similar setup to the PLC Money facility established for Elm Grove Heights in Bungendore, with the cost savings expected to materially increase net fund returns.

Elm Grove Heights is forecast to generate 100% returns while requiring significantly less capital, mitigating the need for dilutive equity raisings.

The same model is being applied across a substantially larger development pipeline at the neighbouring Chinnerys development and at Cowra, 200 kilometres away.

Improved Capital Efficiency

Managing director David Nolan said the amended funds structure would significantly improve the capital efficiency of Aland’s property funds investment model.

“Based on our current assumptions, we estimate Chinnerys can generate approximately $160,000 per lot after all costs—at 200 lot sales per year, that represents approximately $32 million of annual fund income,” he said.

“With 3,200 lots in total, it demonstrates the scale of the earnings opportunity we are building.”

Aland’s estimates are based on the recent average sale price and costs in the adjacent Elm Grove development, the Residual Land Value formula, assumed funding costs, and an assumed 200-lot annual sales rate. 

Mr Nolan said the group planned to launch the Cowra Villa Estate fund in the near future, with Chinnerys targeted to commence in 2027, providing the company and shareholders with a growing pipeline of fund income and funds management revenue.