This article is from the Australian Property Journal archive
MIRVAC’S second build-to-rent project, flagged with last week’s $750 million capital raising, will be on the high-profile Munro site opposite Melbourne’s Queen Victoria Market after the major developer struck a $333.5 million deal with PDG Corporation.
Developer PDG has plans for dual towers on the 6,500 sqm Therry Street site, of 38 and ten storeys, comprising 380 apartments and a hotel, which will need to be tweaked to accommodate 490 build-to-rent units.
Mirvac’s first build-to-rent asset in Australia, the Pavilions project in Sydney Olympic Park, is due for completion in September 2020, with leasing to begin in 12 months.
Last week, Mirvac announced a $750 million raising and said it has $2 billion worth of “identified advanced acquisition opportunities”, and specified a Melbourne CBD build-to-rent project among those.
Melbourne City Council, which has been looking to overhaul the precinct and the Market itself, acquired the Munro site for $76 million in 2014. It struck an agreement with PDG two years later to include $70 million of community facilities as part of a development on the site – among those a childcare centre, affordable housing, and parking spaces for Market visitors – while PDG would develop and retain the towers.
Those rights have now been on-sold to Mirvac as part of the deal. Construction started on the site in January. State Planning Minister Richard Wynne had already ordered that the building height be cut from more than 60 levels to 42, and the agreement between Mirvac and PDG remains subject to approval being secured for the build-to-rent tower.
The City of Melbourne’s controversial $250 million plans to revitalise the Market precinct were upturned last year when Heritage Victoria rejected Council’s plans to temporarily move four 140-year old heritage sheds and dig out three levels of underground parking, as well as areas for traders, totalling some 26,000 sqm, and reassemble the shed.
The Munro site will include 500 basement parking spaces, as the Council seeks to turn the existing car park adjacent to the Market into public and events space. The Council expects 24,000 new residents to be living in the area by 2040.
Mirvac’s chief executive office and managing director, 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 amenities.
“We believe build-to-rent can revolutionise the rental experience with improved choice, quality and security of tenure,” she added.
Concerns over housing affordability in Australia have prompted more enthusiasm for the fledgling sector, which has taken off in the USA, UK and parts of Europe. Large developers and landlords own entire medium and high-density buildings or complexes and lease them on long-term agreements.
The former 2018 Gold Coast Commonwealth Games athletes’ village site is one of the few operating examples in Australia. UBS Asset Management and Grocon have converted 1,251 units into rentals, and a UBS-managed trust owns the project.
“Build-to-rent is one of the largest real estate asset classes in the world and entering into this asset class makes good business sense for Mirvac. It will deliver a secure and valuable revenue stream, as well as presenting us with a new and growing customer base,” Lloyd-Hurwitz said. “We are excited to drive the establishment of the build-to-rent sector in Australia, for which we see enormous potential over time.”
Mirvac said is also poised to finalise the acquisitions of a 70,000 sqm industrial site purchase in Sydney and Melbourne middle ring residential master planned community, while it is in due diligence for a 40,000 sqm Melbourne office development and two Sydney middle-ring master planned communities of 400 and 350 lots respectively, and is shortlisted for an inner Sydney mixed-use development with a gross floor area of 70,000 sqm.
It expects FY2019 earnings to come in at 17.1 cents per stapled security, at the top end of its guidance, while distributions per security will be 11.6 cpss, in line with previous guidance and up 5% on FY18.
Australian Property Journal
