This article is from the Australian Property Journal archive
M&G Real Estate Asia has taken the next step in its $450 million build-to-rent partnership with Novus, buying a Parramatta site with plans to develop a 33-storey apartment building.
The 1,448 sqm site in Sydney’s west was picked up for $33 million on behalf of the US$7.1 billion M&G Asia Property Fund.
The tower will have 195 apartments and commercial, retail, health and wellness amenities,
Construction will commence in the second half of 2023.
Richard van den Berg, fund manager and manager of the M&G Asia Property Fund, said the deal is in line with M&G’s strategy to increase its allocation in the multifamily residential sector.
M&G Real Estate launched into Australia’s nascent build-to-rent sector in April with Novus, seeding the Novus Built-to-Rent Trust with a 173-unit development, Novus on Sturt, on Melbourne’s CBD fringe.
Novus itself was established a year ago as a joint venture between former Mirvac executives Adam Hirst and Jason Goldsworthy, and David Southon and Daniel Wise’s Aliro Group.
The number of active groups in the market has jumped from 12 to 35 in just two years, and the market is forecast to mature into a $9.6 billion market by 2027.
Recently, MaxCap Group’s NSW state director David Oudshoorn said that while build-to-rent makes sense in Sydney more than anywhere else given lack of affordability, it does not stack up because of high land values. Australia’s build-to-rent market is currently dominated by projects in Melbourne.
A large shortage of supply in build-to-sell apartments is set to hit Sydney over the next few years, and combined with the difficult and expensive rental market has made conditions ripe for the emerging build-to-rent sector to fill the void.
However, obstacles remain, including a lack of federal tax concessions, rising construction and land costs, and a lack of financing transactions occurring to date. The NSW government, along with Victoria’s, has announced a 50% concession on land tax for build-to-rent developments recently, and a concession on the foreign investor surcharge.
This M&G Asia Property Fund recently paid US$424 million for a 30-asset residential multifamily portfolio in Japan, taking its total multifamily commitment in the region to US$1.28 billion.
