CFMG Land & Opportunity Fund Financial Year 2020 in review
Dear Investor, As FY20 has come to a close, we look back at a year that was full of noise and potential volatility, but in reality the consistency of performance and results remained rather linear and for lack of a better term, ‘boring’. Now by no means are we suggesting it was anything like a boring year, but the purported impacts or otherwise of each of these events on residential land development have been somewhat minimal. We started FY20 on the back of what many considered a shock election result with the Morrison Coalition Government returned to office. Looking back with the benefit of hindsight, while at the time this seemed like a big deal socially and economically, the events since that time have proven this to be a relative ‘non-event’. However, it all comes down to that key term, ‘relativity’. The subsequent catastrophic bushfire season, fall out from the Royal Commission, record low interest rates and the more recent global pandemic have dwarfed the election in social and economic impact – the actual reality is that the May 2019 election result had more direct impact on the new residential land market than any of the major events since. The level of uncertainty associated with the potential major policy outcomes and their impact on property, and more specifically new residential land development have been matched only by the height of uncertainty in April 2020 when most of Australia entered Stage 3 restrictions. The sales outcomes at CFMG Capital across all projects immediately began to trend north from June/July 2019 and other than the traditional Christmas slow down and the understandably slow April, this trend has continued throughout. Both anecdotal and empirical evidence supports similar results for the broader market. Almost exactly 12 months later, the next significant event to have a direct impact on residential land development was the announcement of the HomeBuilder Grant, which has seen immediate benefits, particularly for those operators who made a conscious decision in March/April to push through the COVID-19 Pandemic. Back when the pandemic was eroding business and consumer confidence, many operators went into panic mode, reduced staff head counts, stood key staff down and effectively went into hibernation. Here at CFMG Capital, we bucked the trend and instead chose to use our time to plan, reinvigorate and prepare. Several key roles were created, including at executive level and we increased our staff headcount by six in the period from April to June. Investors in several projects were redeemed, while we also successfully closed out several investment opportunities. We updated technology via the new investment portal and drew on our expertise in navigating periods of change and uncertainty. This expertise has come from a management team with a history and strong philosophy of taking a conservative, yet realistic approach to investment – with the business having been founded just 6 months prior to the offset of the GFC in 2008, those early days have taught us to adapt and look at the bigger picture.
With these various events and crisis, CFMG Capital have undertaken the following key activities: • Completed the settlement of 335 residential lots with a gross realisation of $70 million • Completed the $6.8 million acquisition of our newest project site to be known as Acacia Village in Wollert, Victoria
fundraising for the Vinnies CEO Sleepout • Expanded the Lomandra Park project to circa 110 premium residential lots via the strategic acquisition of an adjoining 2.02 hectare site to bring the total gross realisation beyond $50 million
• Delivered over 1,000 meals within the immediate community via our involvement in the local Meals on Wheels program
• Transitioned to an internal sales model for Queensland based communities
• Provided in excess of $50,000 in charitable donations and/or sponsorship to local community sporting clubs and groups, including our 3rd year supporting and
• Returned over $4 million capital to investors, with all investors receiving the 12% per annum return in addition to their initial investment
By delivering consistent results and keeping your interests as an investor and partner at the forefront of everything we do, we aim to develop a long term, repeat investment partnership with each and every client. In the following pages, you will find some very useful and general information about the business and our projects and some market commentary. In addition, we supply a sneak preview to some of the upcoming opportunities set for FY21. In these unprecedented times it remains a challenge to know what happens next, however the policy response from State and Federal Governments to date has been pleasing. We understand that the nature of the COVID-19 pandemic has impacted many Australians in different ways. Primarily it is a health issue, and we wish you and your families good health, but it has also been financially catastrophic to some households such as those in aviation and tourism to provide two such examples – we wish you well in these challenging times. As always, if you require anything from our team – please do not hesitate to get in touch. A huge thanks for your ongoing support. Regards, Scott Watson Managing Director
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Property Market update and CFMG Capital Acquisitions Strategy Property prices across Australia have taken a hit since the onset of COVID-19, however the hit has been significantly less than initially feared. New data released shows house prices across the Greater Brisbane area dropped 1.4% in the three months leading up to June, according to Domain’s latest House Price Report. In Sydney prices dropped by 2% over the same period, while in Melbourne prices also dropped by 3.5%. However, Australia’s residential property market held up well across the full financial year, outperforming shares. The total return from residential property (prices and rents) on a national basis was 11.7%, compared with a 7.2% fall in total returns from shares. While this is more of a holistic view, and isn’t specific to the new detached residential market, its also clear that the new development market is more immediately impacted by the movement of economic levers and government stimulus than more traditional residential real-estate markets. The suspension of open houses and auctions for a period did halt the market recovery somewhat, only Perth and Darwin experienced annual price falls as the table (Source: CoreLogic Home Value Index) shows. The two largest markets – Sydney and
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Melbourne metro – both posted double digit returns. Despite the table showing relatively minor negative growth in the most recent quarter, across each of the CFMG Capital projects in both Queensland and Victoria, there has been no drop in sale prices and any negative growth has been absorbed in the established housing market, particularly in the inner rings of major capitals and in high density apartment living. In fact, at most Queensland projects developed by CFMG Capital there was pricing escalation in the quarter from April – June 2020 which was largely driven by high demand. The only direct impact on CFMG Capital developed residential communities was a short period of reduced transactional activity, largely due to closed sales offices and the Stage 3 restriction periods across the country. In Queensland, sales rates have returned and surpassed pre-covid levels, while Victoria saw a spike in activity in June before the second wave has somewhat stifled activity in the short term.
RESIDENTIAL HOUSING VALUES AS AT 30 JUNE 2020 Month
Quater
Annual
Total return
Median Value
Sydney
-0.8%
-0.8%
13.3%
16.7%
$875,749
Melbourne
-1.1%
-2.3%
10.2%
13.8%
$683,529
Brisbane
-0.4%
-0.2%
4.4%
8.4%
$503,148
Adelaide
-0.2%
0.7%
2.0%
6.5%
$440,267
Perth
-1.1%
-1.4%
-2.5%
1.6%
$441,977
Hobart
0.3%
1.0%
6.4%
11.9%
$487,727
Darmwin
0.3%
0.4%
-1.5%
5.7%
$387,914
Canberra
0.1%
0.7%
6.3%
11.2%
$639,965
Combined capitals
-0.8%
-1.1%
8.9%
12.5%
$641,671
Combined regional
-0.2%
0.3%
3.7%
8.5%
$394,570
National
-0.7%
-0.8%
7.8%
11.7%
$554,741
(Source: CoreLogic Home Value Index) The main goal of CFMG Capital is to acquire strategic residential development sites that meet a strict investment criteria and enable us to provide attractive investment opportunities to our loyal client base, in addition to generating an attractive return to CFMG Capital. In order to achieve this, a consistent flow of new acquisitions is required, with the primary challenge being to ensure they meet the clearly defined investment criteria underpinning the CFMG Capital development business. This criteria is defined generally below:
Lomandra Park, Bridgeman Downs (QLD)
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Proximity to a major capital city;
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Population growth and targeted local demographics;
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Proximity to existing and proposed competing land estates;
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Proximity to key planned infrastructure projects;
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Employment opportunities within the area;
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Lifestyle choices including schools, family security, transportation and recreation;
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A forecast 20% development margin (before payment of fund management fees); and
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Subject to the discretion of the Board with a purchase price equal to, or less than, an independent valuation.
Throughout the most recent period of economic uncertainty, CFMG Capital have taken a more conservative approach to site identification and acquisition than is normal, and have had a strong focus on opportunities with longer term settlement, smaller boutique opportunities located in premium infill locations and specifically sites adjacent to, or in the immediate vicinity of existing CFMG Capital communities. By purchasing adjacent to, or in the immediate vicinity of existing projects – CFMG Capital are able to expand existing projects taking advantage of existing marketing, development and sales momentum, or in some cases replace completed projects to meet the demands of various sales networks. Birchwood, Park Ridge (QLD)
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New Investment Opportunities CFMG Capital will continue to provide current investors via the CFMG Land & Opportunity Fund with priority early access to the newest opportunities brought to market. This exclusive priority access allows current investors to secure their positions prior to public release and has proven popular with the re-investment and/or additional investment from our loyal and valued investment partners and clients now at record levels.
Lomandra Park II
Elevate II
Lomandra Park II
Elevate II
This 8.6 hectare site in the prestigious Bridgeman Downs, just 12km from the Brisbane CBD will continue to be developed to create the boutique residential community comprising approximately 110 lots over three stages to form Lomandra Park. This community will service the significant ongoing demand for vacant residential land located within inner ring suburbs of major capital cities. With Stage 1 already completed, this investment relates to Stage 2 of the three stage project.
This 5.7 hectare site sits in a strategic elevated location in Ormeau Hills, situated in the thriving development corridor between Brisbane and the Gold Coast. Just 25km north of the Gold Coast CBD and 40km south of the Brisbane CBD, the site is being developed by CFMG Capital to create Elevate at Ormeau Hills, a high quality lifestyle community of 100 residential allotments.
With a development approval in place, contractors appointed and the already established project including a sales office and planned 10+ lot display village – Stage 2 of Lomandra Park as a standalone investment opportunity is perfectly placed to benefit from the significant advantages already in place and is also surrounded by a diverse range of employment zones and significant major retail precincts: • Australia Trade Coast • Major Health Precincts • CBD Employment Hub • Carseldine Central • Aspley Hypermarket • Westfield Chermside (Major Regional Shopping Centre) There is also no shortage of recreational and educational offerings, with a number of parks and conservation areas offering picnic areas and walking, cycling and horse riding trails and a diverse mix of public and private P-12 schools in the immediate vicinity. This opportunity was released to our priority VIP waiting list in Q3 FY20 and was over 60% subscribed by existing investors.
Expected to be released in August 2020, this investment relates to Stage 2 of the 100 lot development and will encompass the final 46 allotments to complete the project. The strategic location is also just 1km from CFMG Capital’s recently completed 255 lot “The Brook Estate” and immediately adjoins the recently completed Stockland project, the 915 lot “Ormeau Ridge” both of which underline the continued demand for quality residential vacant land in this catchment. With Stage 1 now sold out, demand for Stage 2 is expected to remain strong. The premium elevated location offers extensive views and great proximity to nearby open space and park lands. Also within 1km is the existing Ormeau Town Centre, including Woolworths, IGA, service centre, health care and a range of specialty stores. Just 500m away is the future North Ormeau Town Centre, which is already under construction with Coles confirmed as the major tenant. There are also a wide range of public and private schools from P-12 in nearby Ormeau, Pimpama and Coomera, while various tertiary educational options are easily accessible due to the convenient location of major transport infrastructure such as the M1, Ormeau Train Station and Gold Coast bus routes. Demand for vacant land in Ormeau Hills is also driven by immediacy of key employment nodes including the 127 hectare Yatala Enterprise Area projected to inject $1 billion into the local economy over the next decade.
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Board & Key Executive Update The independent Directors and Senior Executives within the business have a strong history in residential development, financial services, compliance and business strategy. Over the past 12 months, CFMG Capital have made some key appointments. Each appointment has come via either a transition in strategy, the creation of a new executive position or to replace an outgoing staff member. The key strategy transition during this period has been to bring the land sales function of the business 100% in house for the Queensland operations. This resulted in the appointment of five sales consultants within Brisbane who now work directly for CFMG Capital and focus only on the sale and promotion of CFMG Capital residential land sales. To further support this transition and build strategic thought leadership and experience in direct residential land sales, the executive level role of National Sales & Marketing Manager was created in March 2020 and filled by Elio Iacutone in April 2020, a profile on Elio is featured below. This team was further expanded in June when the Marketing Manager role was created and filled. Further to adjustments and enhancements in the Sales & Marketing field - Philippa Bomba, our new Commercial Finance Manager was appointed in January and is profiled below. Each of the new team adds new expertise to the business, whilst also providing key strategic support to the existing high performing team.
MEET PHILIPPA BOMBA COMMERCIAL FINANCIAL MANAGER Philippa joined the CFMG Capital team in January 2020 as Commercial Financial Manager. She is a highly experienced finance manager responsible for the financial management of CFMG Capital projects. Philippa has over 10 years’ experience in funds management and property development having held senior finance positions with White & Partners, CBRE and Stockland. Philippa is CPA qualified and holds a Bachelor of Business from Queensland University of Technology majoring in Accounting and Banking & Finance.
MEET ELIO IACUTONE NATIONAL SALES & MARKETING MANAGER Elio joined the CFMG Capital team in April this year to grow the land development part of the business and oversee the sales and marketing functions across CFMG Capital. CFMG Capital saw a need for an expert in brand management and marketing strategy who was also experienced in leading a marketing and sales team. Elio’s expertise in all of these areas, plus more, ensured he was a great fit to focus on growing the business and manage the supporting team for success. A national and international award-winning dynamic marketing professional with significant experience in managing brands, products and places – Elio was the ideal candidate to fill this newly created role, with experience across a range of major organisations in development and asset management such as Aveo Group, Charter Hall, Lend Lease, Stockland and Colonial First State. Elio has hit the ground running in his new role by developing and rolling out a detailed sales and marketing strategy for CFMG Capital. He’s also launched new communities to market, developed campaigns to drive enquiry and initiated a full review and update to the current customer relationship management system. PROFILES OF ALL CFMG CAPITAL STAFF AND DIRECTORS ARE AVAILABLE ON OUR WEBSITE.
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Marketing Campaign Update
The Marketing Team aspired to create an exciting campaign to generate interest and drive sales at three CFMG Capital communities located in the Logan region. The campaign needed to create excitement and cut-through in the market with dynamic creative and an appealing $100K cashback giveaway for one lucky customer. CFMG Capital has three active projects in the Logan catchment, with all three developments at varying life stages. The available stock across all three projects, both registered and unregistered lots, caters to a wide range of buyers. The Jumpstart Your Life campaign was developed to encourage buyers to choose our projects over competitors with a unique offer, the chance to WIN $100K Cashback! This, combined with the new HomeBuilder Grant, gave CFMG Capital communities a competitive advantage to drive sales from June to September 2020. The campaign was advertised through the following media mix: • Campaign landing page
• EDM
• Social media advertising on Facebook and Instagram
• Outdoor billboards
• Google search
• Letterbox drops
• Display (programmatic) advertising
• Radio advertising
• PR
• Sales office window treatments and brochures
The campaign is currently still active in market, however, we have seen an uplift in enquiry since the campaign was launched to market in June 2020. The enquiry generated from the campaign so far has resulted in over 14,000 visits to the campaign website and 151 customers have registered their interest. The number of customers going into the draw to win $100K cashback will be finalised at the close of the campaign on the 30th of September 2020, as a requirement to enter the draw is an unconditional contract within the promotional period.
Digital shopping centre display, Logan Hyperdome
M1 Motorway billboard
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Oakland Pocket , Morayfield (QLD)
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Project Profiles
ELEVATE, ORMEAU HILLS
LOMANDRA PARK, BRIDGEMAN DOWNS
ACACIA VILLAGE, WOLLERT
• Stage 1 complete with home construction commencing soon
• Stage 1 is complete and registered
• Onsite progress impacted by Covid-19 restrictions
• Stage 2 released for sale on 8th August 2020 – final lots selling
• Stage 2 about to commence construction
• Sales office moved to site and fit out completed early September
• Reduced marketing activity due to high interest in the development
• Master Builders display village set to open March 2021
• All sales currently being conducted remotely via Zoom
• Pent up demand is driving sales
MIDDLETON PARK, LOGAN RESERVE
SOLANDER, PARK RIDGE
THE MILLSTONE, STRATHTULLOH
• Final stage now complete
• Stage 2 and 3 construction is complete
• Selling through the remaining lots
• Steady sales despite Covid-19 restrictions
• Stage 2 selling now
• New residents continuing to move in
• Registered land is in demand • Stage 7 launching soon to meet demand
• Selling approx. 5 lots per month and building momentum • Arrival enhancements complete signage and landscaping
BIRCHWOOD ESTATE, PARK RIDGE
MAYFAIR LANE, ROCHEDALE
OAKLAND POCKET, MORAYFIELD
• Initial earthworks preparation now complete
• All 15 lots are now complete and are presenting well
• Final lots selling
• Marketing activity commenced to launch Birchwood to the market
• Signage now installed around the development
• Inital stage released to drive pre-sales
• Strong interest from the local catchment
• Price growth being achieved due to stock scarcity
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PO Box 663 Level 2, 117 McLachlan St Fortitude Valley QLD 4006
P 1800 155 526 E info@cfmgcapital.com.au W cfmgcapital.com.au