Dutch pension fund giant puts $700m into Sydney build-to-rent start-up

Mr Carolan told The Australian Financial Review he came up with the idea of setting up a venture to develop, own and manage build-to-rent housing after finishing up at Urbanest.

He then spent two years talking to PGGM about his plans, before securing the pension fund manager as a long-term strategic partner last year.

Mr Carolan said the PGGM Private Real Estate Fund’s commitment to allocating capital to Apt.Residential’s developments included an initial “cash portion” of $700 million.

Combined with debt and Apt.Residential’s investment, this will provide a total development budget of $1.5 billion which will fund the development of six to eight rental housing projects in the first phase of growth.

“We’re looking at 150 to 350 apartments per project,” Mr Carolan said.

He said the partnership with PGGM was “open-ended” and part of the Dutch investor’s long-term commitment to developing housing in Australia.

PGGM manages €245 billion ($400 billion) of assets on behalf of a number of Dutch pension funds representing 4.3 million members.

It already has a foot in Australia’s burgeoning build-to-rent sector through a partnership struck in 2022 with American-based Sentinel to develop and manage up to $1.5 billion of rental housing Australia.

PGGM is also an investor in real estate funds managed by Charter Hall, Goodman Group and Lendlease.

PGGM senior director of private real estate in the Asia Pacific, Ronald Bausch, said Apt.Residential’s focus on delivering sustainable housing at a time when it was “clearly needed” was behind its decision to partner with the platform.

“We are delighted to have formed a long-term partnership with Apt.Residential,” Mr Bausch said.

But whereas Sentinel has focused much of its development in Perth and Melbourne, Apt.Residential will focus on Sydney, a market deemed too challenging for many other developers.

“We like a challenge,” Mr Carolan said.

“The team is all based in Sydney and has strong connections with local agents. We are quite confident we can uncover opportunities, but we are under no pressure to find sites.

“We’ve got one project committed in Sydney and two or three more being finalised.

“We’re focused on the inner suburbs of Sydney and in locations where people want to rent.”

All completed assets will be held in a head trust. Mr Carolan declined to discuss return expectations, but said they were the same as expected of on any institutional platform operated at scale.

Mr Carolan has assembled an experienced team of former housing, banking and funds management executives to drive the business, all of whom have equity in the business.

They include former Commonwealth Bank veteran George Confos, former Investa build-to-rent general manager Michael Hogg, former CBRE director Puian Mollaian, and Juey Thanyakittikul and Wei Shi, both of whom previously had roles at student accommodation provider Iglu.

“We pride ourselves on understanding what customers want and expect from the residential living sector. All of us have worked in the living sector previously. That will be our first point of difference,” Mr Carolan said.

Another point of difference he said was the end-to-end offering of the platform.

“This will be a fully integrated platform that includes the acquisition of sites, design and construction, risk management and operations. All will be in-house,” he said.

Apt.Residential’s deal with PGGM follows many other local operators partnering with offshore investment houses.

They include – most recently – private equity-backed Cedar Pacific partnering with Japanese timber, housing and building materials giant Sumitomo Forestry on a $1.2 billion build-to-rent portfolio.

Last week, the Albanese government unveiled plans to revamp foreign investment rules to boost support for rental housing. These include making it easier for completed assets to be on-sold to foreign investors.

However, uncertainty around taxation investment rules are holding off large swathes of offshore capital committing to Australia, developers have warned.