Eureka Group Holdings has acquired Townsville Lakes Holiday Park, adding 110 sites and targeting an 18.2% IRR through conversion to long-term rentals amid tight regional housing markets.
- Acquisition of Townsville Lakes Holiday Park for $6.75 million
- Initial yield of 9.1% with 18.2% target five-year IRR
- 110 sites including short-term cabins and park rentals
- Plans to convert short-term accommodation to long-term rental housing
- Portfolio growth supported by strong regional housing demand
Strategic Acquisition in a Tight Housing Market
Eureka Group Holdings (ASX:EGH) has secured Townsville Lakes Holiday Park for $6.75 million, marking an immediate earnings accretive move that boosts its all-age rental portfolio by 8%. The acquisition includes 110 sites, blending 26 short-term tourist cabins, 82 powered ensuite sites, and two park-owned rentals, situated in North Queensland’s largest city.
Townsville’s housing market is under notable pressure, with median house prices soaring 30% in the past year to $650,000 and rental vacancy rates plunging to 0.6%, well below the balanced rate of 3%. Median rents have also jumped 16% to $462 per week, underscoring acute supply constraints in this employment-driven regional hub.
Conversion to Long-Term Rentals Drives Growth Potential
Eureka’s 3-5 year plan for the park involves converting the short-term accommodation into long-term rental housing or land lease homes, a strategy forecasted to deliver an unlevered internal rate of return exceeding 18.2%. This conversion leverages the existing infrastructure, including roads, sewer, and electricity, and taps into strong local demand backed by diverse industries such as defence, mining, healthcare, and logistics.
Managing Director Simon Owen described the acquisition as a "straight down the fairway" fit for Eureka’s regional expansion strategy, highlighting the attractive initial yield of 9.1% (inclusive of transaction costs) and the low-risk nature of the conversion opportunity. The Group already operates two seniors rental communities in Townsville with full occupancy and robust waitlists, signalling strong market fundamentals.
Pipeline of Acquisitions Signals Continued Growth
This purchase is part of a broader push by Eureka to expand its footprint, with approximately $120 million of acquisitions currently in due diligence or advanced price discovery stages. This follows recent moves such as the acquisition of Mandurah Coastal Holiday Park and the closure of a $28.85 million all-age village fund, positioning Eureka for sustained growth in regional rental communities.
Settlement of Townsville Lakes Holiday Park is anticipated before the end of August, reinforcing Eureka’s momentum in capitalising on tight regional housing markets and undersupplied rental sectors.
Bottom Line?
Eureka’s Townsville Lakes acquisition underscores the value in converting short-term accommodation to long-term rentals amid severe regional housing shortages, but execution of this strategy will be key to realising the forecasted returns.
Questions in the middle?
- How quickly can Eureka convert short-term sites to long-term rentals to meet demand?
- What impact will rising regional housing costs have on rental yields and occupancy?
- Will the $120 million acquisition pipeline deliver similar accretive opportunities?