Boomer demand triggers gold rush in build-to-rent market
LOS ANGELES: Boomer demand has triggered a gold rush in the emerging build to rent market.
One of Australia’s busiest build-to-rent companies, Greystar, will buy prime inner-city Melbourne land to build 400 apartments, bringing the number of units in its pipeline to about 3000.
Greystar will acquire the land – a 5390-square-metre site – for an undisclosed sum from Malaysian developer UEM Sunrise as part of a fund-through arrangement. The deal will have the two companies working together to develop Collingwood’s first build-to-rent project, which will be fully owned by Greystar when completed.
The 400 apartments will be spread across two towers with a connecting bridge and retail precinct on the ground floor.
The deal adds more momentum to Greystar’s build-to-rent push. The investor snapped up a 7000-squaremetre site at 888 Bourke Street, Zetland, in inner Sydney, for $72 million less than a fortnight ago.
The US investor has raised $1.3 billion in equity for its main build-to-rent investment fund, sufficient to develop about $4.25 billion of rental accommodation, or about 4500 apartments.
The Collingwood project’s lot, 21-53 Hoddle Street, was originally acquired by UEM Sunrise for $43 million in 2021 as part of plans to re-enter into Australia’s build-to-sell apartment market in time for the pandemic recovery.
But changing market dynamics and the fast-expanding build-to-rent sector led to a strategy shift, UEM Sunrise chief executive Sufian Abdullah said.
“We felt that this was an opportunity where we could capitalise on the emergence of the build-to-rent asset class, specifically, being that it is still a relatively untapped market in Australia,” he said.
Mr Abdullah said the decision to sell the Collingwood site and develop the BTR project was part of UEM Sunrise’s strategy to diversify its portfolio. He said the company was actively searching for new opportunities in Australia and some deals were “on the home stretch”.
Publicly listed in Malaysia, UEM Sunrise is the development arm of the UEM Group, which is wholly owned by Khazanah, a Malaysian government investment fund.
Construction is expected to commence in mid-to-late 2024 and take about three years. Once completed, the 400-apartment development is expected to be valued at around $277 million, Mr Abdullah said.
For Greystar, the Collingwood development marks the first time it will build a project with a delivery partner. Greystar Australia managing director Chris Key said the company was open-minded about forming partnerships to deliver projects but did not have a specific profile in mind.
“Finding a project of scale in Collingwood is a very rare opportunity and hence why we were attracted to add to this particular investment,” Mr Key said.
Greystar’s latest move is part of a broader acceleration across the $17 billion rental housing sector with major property platforms such as Brookfield, Cedar Pacific and ASX-listed Stockland flagging their first forays into the build-to-rent sector in the past month.
It also comes after tax breaks were included in the federal budget, designed to foster foreign investment in the growing sector, which is known overseas as multifamily accommodation. Recent Oxford Economics Australia research has shown that build-to-rent is expected to become Australia’s biggest asset class in property development by 2030.