Rental Shortage Risks Persist Despite Eureka’s New Emerald Acquisition

Strategic Acquisition in Emerald

Eureka Group Holdings Limited (ASX, EGH) has announced the acquisition of Emerald Tourist Park, a well-established mixed-use accommodation facility located in the Central Queensland town of Emerald. This marks Eureka’s sixth acquisition since its recent $70.4 million capital raise, underscoring the company’s aggressive expansion into regional rental accommodation markets.

Emerald Tourist Park sits on a 3.09-hectare freehold land parcel and currently operates 106 sites, including cabins, motel rooms, and powered and unpowered caravan sites. The park also benefits from existing development approvals to add 31 cabins, 32 motel rooms, and 40 powered caravan sites, presenting significant growth potential.

Financial Metrics and Market Context

The purchase price of $7.5 million reflects an attractive initial yield of 8.5%, excluding transaction costs. Eureka projects a five-year internal rate of return (IRR) of 19.0% assuming the development of 55 additional long-term rental units and motel rooms. This strong financial outlook is supported by Emerald’s low rental vacancy rate of 0.5% and robust rental growth of 11.3% over the past year, driven by the town’s stable population of approximately 15,000 and its diverse economy anchored by mining, agriculture, and renewable energy sectors.

CEO Simon Owen highlighted the acute shortage of rental accommodation in regional Queensland towns like Emerald, emphasizing the demand from mining and agricultural workers, as well as support service employees. He noted that the acquisition aligns with Eureka’s strategy to provide affordable, all-age rental housing in high-demand regional markets.

Growth and Development Prospects

Emerald Tourist Park includes amenities such as a manager’s residence, camp kitchen, food van, and guest laundry, enhancing its appeal to residents. Eureka plans to seek amendments to the existing development approval to better align with its long-term rental strategy, focusing on a mix of retirees, regional workers, and new residents attracted by employment opportunities.

With a strong presence already established across Central Queensland; including five seniors rental villages and two all-age rental communities; this acquisition further consolidates Eureka’s footprint along the 380-kilometre corridor between Rockhampton and Hervey Bay. Settlement of the acquisition is expected in early August, setting the stage for the next phase of development and rental expansion.