Small investors have so far poured more than $6 million into a fund that has been set up to buy land near Sydney’s future second airport at Badgerys Creek, which it will later on-sell to developers.
While many investors are looking to cash in on rising land values around the proposed western Sydney airport, what makes this fund different is that it is raising the money through crowdfunding, with some investors entering the game with as little as $2500.
Sydney-based investment management firm KSI Investments’ retail landbanking managed fund – which its chief executive officer Robin Luo claims is Australia’s first to be done through crowdfunding – allows private investors to acquire a stake in land near the planned growth precincts of Sydney’s second airport without purchasing the whole property.
The target amount to buy its first property, the 2.1-hectare block at 64 Devonshire Road, Rossmore, was $3.4 million but the fund was oversubscribed after 56 investors signed up. It reached $6.4 million in five months through fractional investment platform DomaCom.
The surplus in funding commitments of $3 million will flow on to the next purchase, a 2.5-hectare block at 60 Devonshire Road, which has a target amount of $5.3 million – meaning it is now 56 per cent subscribed.
Mr Luo said the firm plans to buy up more than 50 blocks of land near Badgerys Creek in the next three to five years. The large and continuous flow of capital required for the ambitious plans drew them to the idea of crowdfunding.
“We wish to do more landbanking in a larger quantity, and we’re not just targeting these two pieces of land,” he said.
Mr Luo said while crowdfunding was still new in Australia, it would become a typical way to invest in property in 10 to 20 years, especially for millennials.
“Crowdfunding for properties is still not in the mainstream, many people are just putting in a couple of thousands to test the water,” he said.
“The majority of investors at that time will be those born in the 1990s and 2000s – those kinds of players will wish to invest through crowdfunding and mobile.”
Subscribers have been mostly self-managed super funds, individual investors and a small number of family trusts. One investor committed $500,000 to the landbanking fund.
“This transaction strongly demonstrates the vision behind the DomaCom platform, as we’re helping investors pool money together to purchase quality land assets that would normally be the domain of institutional investors,” DomaCom chief executive officer Arthur Naoumidis said.
Through DomaCom, investors can also freely trade units in the fund at any time, as long as there is a matching buyer and seller before the land sells.
KSI only manages the investment but has no control over the money, which means profits go straight back to individual investors.
Between 110 and 140 houses could be built on the two adjoining land parcels at Rossmore if it is rezoned for low-density residential use, which KSI expects to happen by 2025.
KSI forecasts the potential residential rezoning and development approval would lead to an uplift of 23 per cent a year, or 1030 per cent by 2027 when the fund is expected to dissolve.
If the land isn’t rezoned, the firm still expects values to grow by 13 per cent a year.
Because they are purely landbanking and will aim to resell the land to developers, no development or construction will take place.
The future Badgerys Creek Airport, stage one of which is scheduled to be completed by 2026, has been a boon for land prices in the area, particularly following the NSW government’s announcement in May 2017 that they would build the airport.
KSI charges investors a 2 per cent management fee a year and a 20 per cent performance fee when the property sells.