Eureka Group Holdings (ASX: EGH) expands with Emerald Tourist Park buy, targets 19% IRR in Queensland rentals

Eureka Group Holdings Limited (ASX: EGH) has intensified its regional expansion strategy with the A$7.5 million acquisition of Emerald Tourist Park in Central Queensland, marking its sixth acquisition since completing a A$70.4 million capital raise earlier in 2025. The acquisition, which comes with an initial yield of 8.5 percent and an unlevered five-year internal rate of return (IRR) of 19 percent, aligns with Eureka Group Holdings’ strategy to grow its portfolio of affordable, all-age rental accommodation assets. Settlement is expected in early August, further cementing the group’s presence in high-demand regional markets driven by mining, agriculture, and renewable energy employment.

The Emerald Tourist Park spans 3.09 hectares of freehold land and includes 106 existing sites comprising a mix of cabins, motel rooms, and caravan sites. It also carries development approval for an additional 31 one- and two-bedroom cabins, 32 motel rooms, and 40 powered caravan sites. Eureka Group Holdings intends to amend this approval to focus on long-term rental accommodation, planning to deliver 55 rental cabins and 24 motel rooms under its all-age strategy. This transition is expected to deliver higher recurring rental yields compared to transient tourism-focused operations, a move consistent with the real estate operator’s broader strategic repositioning.

How does the Emerald Tourist Park acquisition reflect Eureka Group Holdings’ push into affordable long-term rentals in Queensland’s employment-driven towns?

Eureka Group Holdings, historically known for providing community-focused independent living accommodation for seniors and disability pensioners, has been diversifying its portfolio into affordable all-age rental housing. The shift has been prompted by increasing demand from working populations in Queensland’s regional employment hubs, particularly those supported by resource, agriculture, and renewable energy industries. Emerald, located about 270 kilometers west of Rockhampton and with a population of approximately 15,000, exemplifies these dynamics. The town’s rental vacancy rate sits at a low 0.5 percent, while rental prices have grown 11.3 percent over the past year, creating favorable conditions for a build-to-rent model.

Institutional investors tracking Eureka Group Holdings interpret the Emerald deal as a logical extension of the group’s strategy to capitalize on housing undersupply in regional markets. With five seniors rental villages and two all-age rental communities already spanning the 380-kilometer corridor between Rockhampton and Hervey Bay, the Emerald Tourist Park acquisition deepens the company’s footprint in Central Queensland. By focusing on stable, long-term tenancy markets rather than transient tourism revenue, Eureka Group Holdings aims to secure more predictable income streams that align with investor preferences for defensive cash flows.

According to management commentary in the ASX filing, the target demographic mix for Emerald will include retirees from the surrounding region, hi-vis workers who will use the property as a weekday base, and support service workers linked to the mining and renewable energy sectors. This diversified tenant base is expected to reduce occupancy volatility, a factor analysts consider crucial in regional property markets where workforce mobility can significantly affect rental stability.

What are analysts and institutional investors indicating about the financial performance and valuation upside from this acquisition?

Market observers have noted that the acquisition’s ingoing yield of 8.5 percent and the projected five-year IRR of 19 percent make Emerald Tourist Park one of Eureka Group Holdings’ more attractive recent purchases. Analysts have emphasized that the high IRR reflects both favorable land utilization potential and the ability to increase long-term rental stock in a supply-constrained market. The A$7.5 million price tag, when compared with regional commercial land values, suggests the transaction is priced competitively, particularly given the development potential already supported by planning approvals.

Eureka Group Holdings, which reported a market capitalization of approximately A$233.3 million as of July 18, 2025, continues to maintain a conservative capital structure despite its recent string of acquisitions. With 424.18 million ordinary shares on issue, a price-to-earnings ratio of 13.41, and a dividend yield of 2.6 percent, the stock remains attractive to yield-focused investors. The company has recorded a one-year share price return of 5.11 percent, trading within a 52-week range of A$0.435 to A$0.70, and closed unchanged at A$0.55 on the ASX following the announcement. Institutional sentiment remains cautiously optimistic, with investors closely monitoring how quickly Eureka Group Holdings can transition Emerald’s current operations to long-term rental stock without significant disruption to cash flows.

Institutional investors also view the Emerald acquisition as part of a broader effort to deploy proceeds from the earlier A$70.4 million capital raising efficiently. With six acquisitions already completed under this funding initiative, there is growing expectation that management will prioritize high-yield, expansion-ready properties in similar regional markets, balancing acquisition-led growth with measured debt utilization.

What does this acquisition mean for Eureka Group Holdings’ longer-term growth trajectory and regional housing strategy in Australia?

Eureka Group Holdings’ management has consistently stated that affordable housing undersupply in regional Queensland offers a long runway for expansion. CEO Simon Owen highlighted in the ASX announcement that Emerald, like many regional towns, suffers from a chronic shortage of rental accommodation due to the high demand from industries that employ a large itinerant workforce. Analysts believe this trend will persist as Queensland continues to attract mining, energy, and infrastructure investments, ensuring steady housing demand across regional hubs.

From a strategic perspective, the acquisition aligns with Eureka Group Holdings’ dual-track growth model, which focuses on scaling both seniors rental living and affordable all-age rental accommodation. The integration of Emerald Tourist Park into its portfolio is expected to strengthen operational synergies across its Central Queensland network, enabling shared management resources and potential bulk procurement savings. This networked approach could also provide a competitive edge in tenant acquisition and retention, especially as other operators begin targeting similar high-demand corridors.

Looking ahead, institutional sentiment suggests that further acquisitions will likely target towns with similar employment-driven housing shortages, particularly in Queensland and possibly northern New South Wales. The emphasis on properties with underutilized land and existing approvals signals that Eureka Group Holdings will continue favoring assets that allow for rapid development of long-term rental units, ensuring higher IRRs and faster payback periods.

For investors, the key watchpoints remain the speed of development approvals and the company’s ability to maintain current dividend yields while expanding its asset base. Analysts expect that successful integration of Emerald and other recent acquisitions could position Eureka Group Holdings for a re-rating within the ASX real estate sector, where it currently ranks 57th out of 98, and 722nd overall among 2,330 listed companies.