Macquarie-backed player plans $370m build-to-rent project in Melbourne
One of the country’s largest build-to-rent developers, Local: Residential, has acquired a site in inner-city South Melbourne with plans for a $370 million apartment project, as the emerging rental housing sector accelerates in the Victorian capital.
Local, which works with a fund managed by Macquarie Asset Management Real Estate, will develop 355 rental units at 15-37 Bank Street, adding to its $2.5 billion residential pipeline in Melbourne.
The site, a short walk from St Kilda Road, was acquired from US giant Hines, which had earmarked it for inclusion in a $1.5 billion build-to-rent portfolio it planned to develop with Canada’s Cadillac Fairview, the real estate arm of the Ontario Teachers’ Pension Plan.
Local is aiming for a mix of studios, one-, two- and three-bedroom apartments with 10 per cent of the development dedicated to affordable housing. Co-working spaces, a gym, wellness facilities, a heated pool and a rooftop terrace are among the planned amenities.
It is Local’s second project in South Melbourne, a CBD-fringe suburb, alongside a development at 245 Normanby Road set to be completed this year. Nationally, Local has a $3.25 billion pipeline of residential projects, with about 4000 units in the works.
Dan McLennan, Local’s co-chief executive, said the site’s location near the new Anzac Metro Station, the Royal Botanic Gardens and Albert Park Lake was a major attraction for its next project.
“From a renter’s perspective, it’s a really, really exciting proposition and [there’s] not a lot of build-to-rent offerings in that precinct,” he told The Australian Financial Review.
“We want to provide a product which is definitely superior to private market rental. However, we’ve always had a really keen focus on ensuring that what we’re producing is still attainable to the market.
“Irrespective of whether there’s a planning obligation or other incentive, we always include that component of non-market housing for people who would otherwise be excluded.”
The Bank Street property was brokered by CBRE’s Trent Hobart, David Minty, Andrew Purdon and Alex Shaw.
The new project follows on from Local’s recent appointment by the Victorian government to deliver about 350 rental apartments, including more than 100 affordable residences, in its Fitzroy Gasworks development in Melbourne’s inner north. The former gasworks site is being transformed into a new precinct with affordable and sustainable homes, sports and education facilities and public spaces.
With the advantage of relatively lower-cost land sites, Melbourne is proving to be a hub for build-to-rent projects, attracting investment from local and offshore capital.
Lendlease won the backing of Tokyo-listed property developer Tokyo Tatemono for a $500 million build-to-rent tower in the city’s Docklands in December. Marubeni Corporation, Haseko Corporation and Mizuho Leasing are partnering with Sydney investment house AsheMorgan to deliver a $600 million build-to-rent project in the same area.
Beyond Melbourne, Local has acquired the management rights of Gold Coast’s Smith Collective, owned by Abu Dhabi Investment Council, last year, which lays claim to being the nation’s largest build-to-rent property with 1252 apartments.
“Our own projects are leasing up incredibly strongly at the moment,” McLennan said.
“Relative to the broader market, I think build-to-rent is still a pretty small proportion of the overall [rental] stock available.
“We would think it’s got quite a long way to go before we would consider the market to be saturated or oversupplied.”
