In a single deft move, Australia’s biggest student accommodation owner and operator has charged into the country’s booming build-to-rent market with a new $1.5-billion fund and plans for 10,000 apartments by 2030.
Scape Australia has turned to its long-time Dutch investment partners APG Asset Management and Bouwinvest to finance the joint venture—still subject to regulatory approval— which will both build facilities and acquire existing assets.
Scape’s chief executive Anouk Darling said the yet-to-be-named joint venture would focus on developing new urban, transport-oriented rent-to-live assets.
It would be a blind fund, allowing flexibility to develop or buy without pre-committed sites.
“Like with any fund, and certainly with build-to-rent, we obviously want to deliver scale,” Darling told The Urban Developer.
“So we’ll be looking at our own developments as well as potentially acquiring existing assets, if it makes sense, although those assets will ideally be big build-to-rent assets. We don’t have any appetite necessarily to buy build-to-sell stock and then try to retrofit it.”
Australia’s suddenly crowded build-to-rent sector saw fresh impetus early this year after the Albanese government introduced incentives to encourage investment, including halving the withholding tax rate imposed on foreign investors in managed investment trusts to 15 per cent.
Industry stalwarts, including Darling, had long lobbied for the 30 per cent tax to be dropped to 15 per cent.
She said the change in legislation had further pushed the joint venture forward.
“Definitely,” Darling said. “It suddenly makes it a lot more attractive for capital, and we’re going to see a lot more happening in the sector.
“We’re always going to advocate for it. And there should be some changes around other charges…stamp duty and land taxes, and foreign owner surcharges.”
The joint venture will first focus on the more mature Australian markets of Sydney, Melbourne and Brisbane.
Two buildings are already under construction in Sydney—although one of those is within a different fund—and a third is in the development application phase in Melbourne. The Sydney facilities will likely complete towards the end of 2024.
“We will look at other cities but obviously we’ll follow the demand and while there is under-supply everywhere, it makes sense to fit our investment thesis close to transport interchanges, key demand and access.”
She said Bouwinvest, which manages real estate portfolios for institutional investors, had been in all their investments since Stephen Gaitanos and Craig Carracher founded Scape Australia in 2014. APG, one of the world’s largest pension fund investors, had also been involved in a number of investment vehicles and was a long-standing partner.
Bouwinvest director of Asia-Pacific investments Robert Koot said they had extensive expertise in the affordable and sustainable housing segment in many countries around the world, including the Netherlands, US, Germany and Japan.
“Via this new joint venture we are now broadening the exposure of our clients and further diversifying their allocation in Australia. Scape and APG are well-known to us and are excellent partners to enter this market,” he said.
It’s not APG’s first foray into Australia’s build-to-rent sector, with the 15-year-old financial backer joining Canadian investment house Ivanhoe Cambridge in a $1.3-billion capital raising for US build-to-rent specialist Greystar in November of 2021.
APG head of Asia Pacific real estate Graeme Torre said the rented residential sector was an important part of their global portfolio.
“It is fully aligned with one of the building blocks of our real estate strategy—urbanisation, where among other things, we look to address important issues such as housing affordability,” he said.
Investors have increasingly looked to build-to-rent as a way of providing more supply at a time when traditional build-to-sell developers have faced 11 interest rate rises in 12 months, soaring building costs and weak pre-sales.
Scape manages more than 33 operational assets across the country with about 16,300 apartments. Twelve purpose-built student housing and urban living facilities are under development, which will add another 10,000 apartments. It’s acquired 22 major development sites since 2015.
“Our ambition is to democratise the rental market by leveraging the operational scale we have already from the students and delivering really intelligent and inspired design environments at value,” Darling said.
“In terms of the affordability factor it will be at market, but with I guess the added environments, because we’ve already got a scaled offering, we know how to deliver it, we know how to operate it, and we know what the community wants.”
Article source: www.theurbandeveloper.com