This article is from the Australian Property Journal archive
MIRVAC is spearheading the AREITs sector move into build to rent housing, teaming up with the Clean Energy Finance Corporation (CEFC) to form the Australian Build-to-Rent Club, which will develop up to six purpose-built apartment buildings.
The seed asset for the $1 billion club, which CEFC will have a 30% cornerstone interest, will be the 258-unit Indigo apartment project at Mirvac’s Pavilions precinct at Sydney Olympic Park.
This will be Mirvac’s first purpose-built build-to-rent asset in Australia and its fourth building in the precinct. Construction on Indigo has commenced, with completion expected in FY21. Mirvac will act as the development, investment and property manager of the asset on completion.
CEO Susan Lloyd-Hurwitz said renting has become a lifestyle choice for a much wider group of people who want to be closer to work and other lifestyle services and amenity.
“Build-to-rent is an emerging sector where we can leverage our significant expertise in residential development and our asset management capabilities. It is very pleasing to have the CEFC on board with Mirvac in this exciting new venture,”
Lloyd-Hurwitz said the ABTRC was targeting a portfolio of five to six projects, mainly in Sydney and Melbourne.
“We believe build-to-rent can provide renters with better choice, better quality and better security of tenure.
“Recent reforms from the federal government, as well as the work of state government working groups, have demonstrated strong support and momentum for the build-to-rent sector,” she added.
Lloyd-Hurwitz said build-to-rent makes good business sense for Mirvac, by providing the group with a new asset class and a secure revenue stream, as well as presenting it with a new and growing customer base.
A recent JLL report found capital flowing into Australian real estate will likely grow in excess of 7.5% p.a. however the stock of core office and retail assets will only increase by 4-5% p.a.
With office and retail assets accounting for over 85% of institutional investment in Australia, JLL predicts capital will turn its attention to alternative real estate, such as build to rent.
“We are excited to drive the establishment of the build-to-rent sector in Australia, for which we see enormous potential over time,” Lloyd-Hurwitz said. “Build-to-rent allows us to leverage our significant residential development expertise and asset management capability, and it’s very pleasing to have the CEFC on board with us in this exciting new venture.”
The CEFC’s investment will help to enhance sustainability at Indigo, which has been designed to achieve a minimum of 40% less greenhouse gas emissions than a typical apartment building.
CEFC CEO Ian Learmonth said with almost one third of Australians now in the long-term residential rental market, it is critical that developers and owners incorporate innovative sustainable design measures from the early planning stage.
“We’re pleased to work with Mirvac to demonstrate how this can be achieved across this major new investment platform. We see this as a win for tenants, a win for Mirvac and a win for the environment. We look forward to seeing this approach to sustainability extended across other residential developments.” Learmonth said.
The CEFC’s investment in the club builds on its relationship with Mirvac. Earlier this year, the CEFC committed up to $90 million in debt finance towards three of Mirvac’s proposed masterplanned communities in Brisbane and Sydney (subject to planning approvals). New homes at these masterplanned communities will have built-in solar-plus-battery systems that are expected to reduce household energy costs by as much as 90%.
Mirvac intends to grow the ABTRC over time and discussions with additional club investors are ongoing.
Build-to-rent or multi-family residential developments are well established in the US and Europe, where institutional investors own entire residential developments, and offer the surety of long-term leases to individual residents. The sector is only just emerging in Australia, in response to high property prices and changing consumer preferences.
Last month the New South Wales government announced it will donate a 1.1ha land parcel in Redfern to develop a build to rent project.
There are only a handful of build-to-rent projects currently in Australia, most notably UBS Grocon’s 1,250-unit Commonwealth Games Village site on the Gold Cost, while Salta properties is developing a $330 million mixed-use project at 699 La Trobe Street that will include built-to-rent 260 units and a five-star hotel, and plans for build-to-rent offerings within its recently-approved 426-apartment, $390 million mixed-use project next to its Victoria Gardens shopping centre in Richmond.
Over summer, Grocon paid around $35 million for a Southbank site in Melbourne at 256-266 City Road, with a permit for 410 apartments over 61 levels that it will use for executive-style build-to-rent units.
CBRE said build to rent could be attract up to $300 billion of institutional investment over 20 years.
Australian Property Journal
