This article is from the Australian Property Journal archive
MACQUARIE backed build-to-rent platform Local has entered into a development agreement with Blue Earth Group to acquire a $280 million project in a turnkey deal.
The turnkey agreement will see Blue Earth Group work alongside Hamilton Marino to deliver the BTR project on behalf of Local.
Designed by CHT Architects, the 40-level tower will comprise 421, one, two and three-bedroom apartments and will provide over 1,400sqm of communal space.
Located at 245 Normanby Road South Melbourne, the existing design has been refined to meet the BTR market including adding more communal space as well as align with Local’s ESG values by creating a fully electric building that will be carbon neutral in operation.
Residents will have access to state-of-the-art amenities including private dining, games room, yoga room, gym, lounge/dining facilities, cinema, dog wash and games room as well as nearly 600sqm of outdoor space, inclusive of a lap pool, outdoor playground and outdoor lounge. The ground floor will offer coworking space, e-games, retail tenancy and the introduction of a communal cafe/wine bar via the entry lobby on Normanby Road.
“We are thrilled to be working with Blue Earth together with Hamilton Marino and their broader project team, who have a longstanding track record of delivering quality apartment projects in Melbourne for nearly 30 years.” Local co-CEO and founder Dan McLennan said.
“The market fundamentals for build-to-rent are particularly strong and continuing to gain pace. The scale of this particular project supports our model of incorporating “salt and pepper” Impact Housing in our developments and is just one of many BTR projects currently in the Local pipeline,” he added.
Local is backed by Macquarie and the brainchild of Matt Berg and Dan McLennan.
The platform is focused on providing a better and fairer alternative to the current rental market by providing diversified housing at an attainable price in an inclusive community for residents.
Berg said the deal demonstrates Local’s capability to partner with developers and builders to deliver fund through and turnkey transactions.
“These types of transactions are quite common in the UK market and we expect to see more of them in the Australian market as developers with great sites realise the need to deliver a specific type of residential project that is tailored to our customer’s needs.”
“Of the five similarly structured deals completed in the BTR space since its inception, Dan and myself have managed three of them,” he added.
“They are significantly more complex than a typical acquisition and certainly require an investment in time and collaboration to ensure you set the right foundations for the project and ensure everyone’s interest is protected along the journey. Collaboration is part of our DNA at Local and we have built up considerable expertise in this area at both Local and in our previous roles,” said Berg. “This is a specific strategy for us moving forward as these types of deals provide the opportunity to partner with experienced developers like Blue Earth and allocate the development risk and opportunity between owner, developer and builder in a way that is fair to each. In the current environment, it also allows us to acquire for a fixed price.”
Construction is due to commence in October 2022, with the building to be operational by Q1 2025.
This latest announcement comes as activity in the BTR sector continues to gain traction. This week US real estate investment and development firm Sentinel and Dutch pension fund manager PGGM announced a $1.5 billion partnership to develop and manage communities across Australia.
Australia’s build-to-rent sector is set to mature into a $9.6 billion market by 2027. Construction of projects already underway is expected to peak in 2022, with 14 major institutional investors currently developing 40 build-to-rent projects. Federal government tax arrangements still present challenges to the nascent sector, while the Victoria and NSW government have introduced concessions.
Most existing developments either under construction or in planning are in Victoria. Major institutional players and developers active in the market include Greystar, Mirvac, Investa and Oxford’s Indi, as well as Gurner, Altis and Hines.
With rental vacancies tightening and the National Housing Finance Investment Corporation forecasting a shortfall of 163,400 homes by 2032, property players say build-to-rent can fill the void left by build-to-sell.
