Please introduce Versailles Capital to The Yield….
Versailles Capital Pty Ltd is an investment company specialising in early-stage property development opportunities. We make tangible opportunities more accessible, more often, with less risk. Our team has 125-years combined experience in business, property development and financial services. Our investment strategy focuses on the acquisition of both unimproved and improved sites using option contracts that allow us to complete the development application and approval process. We minimise the risk of each purchase by paying the owner/s a small amount of funds initially, thereby giving us the right to purchase it later, like stock market call options. We only use call options, not ‘put and call’ options so as not to overexpose the projects. From there we settle on the property approximately 3 years later once we have completed all the planning approvals for the property. We have established a 35% profit margin as a hurdle rate for all acquisitions. We target urban areas that have a low density and have been earmarked for high density. The call options allow us to complete planning processes, have development approval and be shovel ready at minimal risk.
We like to say that we build the dream, but we do not always have to build the property. Getting the planning permission leads to a significant uplift in land value. Our most recent success story consisted of the purchase of a site in Epping located in northern suburbs of Sydney for $1.75M for which we then received development approval for 130 luxury apartments. This site was sold unimproved 18 months after acquisition for $8.45M. Investors nearly doubled their money each year, earning 99% per annum on this investment. If appetite exists, then we will settle on the option and we can take the project to construction.
Can you give an example of one of your current projects?
Our current project is in The City of Parramatta. The New South Wales government is keen to move jobs away from the main Sydney CBD to Parramatta, located 24 km west of Sydney. The Government will be moving approximately 5,000 jobs from Sydney to Parramatta. A lot of commercial development is currently in progress so it is natural that residential will follow. There has been great tri-partisan collaboration between the State, Federal and local government in this area, so there is a lot of infrastructure being built there to support the doubling of the Parramatta population over the next 20 years. Parramatta is much more viable for upscale high-density development in comparison to the Sydney CBD. The population of Sydney is set to explode, growing from 5 million to 8 million people over the next 20 years, so there is significant growth ahead. Parramatta is geographically the centre of Sydney and is specifically earmarked for higher rates of population growth.
We are operating in other regions across New South Wales however our current focus is actively targeting this area as it presents a current opportunity. There is going be a second airport in the region, new rail lines, new tunnels, first high-density school, expansion of medical facilities and a new state of the art stadium has been built…. All this infrastructure is now coming into play as the Federal government has fast tracked approvals, partly due to the impact of Covid. All in all, the government has a budgeted spend of AUD$100 billion in Parramatta alone. This is all good news. We are targeting where the government is looking to create.
Our current project in Parramatta will have river views and will be looking right across from the new Powerhouse Museum which is currently located near the Sydney CBD. The new museum is architecturally touted as the second Opera House. This is an example of the government focus on the City of Parramatta.
Do you only invest in resi?
We develop resi and commercial/mixed use. The site mentioned currently has 42 old units on a 4,014m2 block and we are going to planning for 322 units in 2 towers across 36 levels in total. The ground floor of which will be commercial. Total Gross Floor Area achievable is 27,696 at a height of 115m. When built to its full potential it is estimated to have a profit margin of 40% or AUD $76 million.
Are you looking to raise?
As this project is still in early stage, we are currently seeking funds of AUD$4 million. We are currently also across 4 other similar size developments. So total initial funding sought is AUD $20 million.
For the site mentioned we have negotiated a lengthy call option and we are not recquired to settle on the site until 2023. This leaves us with ample time to complete the planning process and obtain approvals which we envisage will approximately 18 month timeframe. We have fostered solid relationships with family offices and fund managers as we have a basket of opportunities that cater to various risk appetites. We currently are looking for an early stage equity partner. We are building interest from Europe, Hong Kong and the US and align ourselves with partners that have the same vision and appetite for risk. Building a long-term relationship is our focus.
How has COVID impacted Versailles?
We have been able to renegotiate our contracts and have extended the option period with landowners. We identified the risk immediately and sought to offset it. Property prices have currently remained strong in Sydney. The government has also come in with strong stimulus at a State and Federal level which has made the purchase of the end product more feasible. Interest rates have also fallen which has added to affordability. There has also been a fast tracking of infrastructure developments and the development approval process at a State and Local level. Approvals that previously took 6 months to complete are now being completed in half the time. The government wants to see the construction and residential industry at the forefront of any recovery.
What are your expansion plans?
With the right type of partners on board, we can accelerate the acquisition of more properties in this market. Sydney’s long-term potential is staggering, and Australia when stacked up against the rest of the world right now, is definitely the best place to invest.