Our Approach
Australian Freehold addresses a large inefficiency in the $680 billion Australian commercial real estate market...
An inefficient investment
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Owning both the land and building means investors have been forced to own two types of assets with different characteristics.
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Building:
Medium-term Asset
High ROE Asset
Active Asset
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Land
Long-term Asset
Low ROE Asset
Passive Asset
Land and Building -
Separating the land and building assets to better allocate risk and enhance returns for investors.
Building:
Higher Returns
Lower equity requirement
Better cash on cash returns
Land:
Passive Manager
Low Volatility
Steady Cashflows
The separation of land from building creates two separate assets.
Consider -
Sydney CBD: Asset Case
Purchase price: $100,000,000
Australian Freehold Ground Lease: $35,000,000
Leaseholder Building Price: $65,000,000
Lease Term: 99-299 years
Security: AAA equivalent
Yield in Dollar Figure: $5,000,000
The power of an Australian Freehold Lease:
Traditional Financing
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$35,000,000 Equity
$65,000,000 Debt at 4%
1.92 x - ICR
6.9% Cash on Cash Return
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Yield: 5% ($5,000,000)
Australian Freehold Ground Lease
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$35,000,000
(AF Freehold Purchase Price)
$22.75M - Equity
(35% of property value)
$42.25M - Debt at ~4%
(65% of property value)
2.23x - ICR
9.2% - Cash on Cash Return
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Yield: 7.69% ($5,000,000​)