State govt incentives spur institutional interest in build-to-rent

3 McNab Ave, Footscray
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CANADIAN giant Oxford Properties is furthering its foray into the build-to-rent market, with a first project in Melbourne valued at $450 million, as tax breaks begin to generate momentum in the fledgling sector.

Oxford will partner with Investa Office Management in acquiring a site in the western suburb of Footscray that is expected to yield about 700 dwellings, with a mix of apartment types.

The acquisition is the first following Oxford’s recent purchase of a 50% stake in the Investa management platform.

Oxford’s is developing the first build-to-rent site in Sydney’s CBD. Construction will begin next year on Pitt Street South, above the Pitt Street Metro station, with completion of the 230 unit, 39-level tower expected by the end of 2023. Investa is providing investment and development management services on the project.

“The Footscray acquisition is in line with Oxford’s strategy to actively grow its exposure to Australia and the nascent build to rent sector, with a focus on assets in core markets that offer scale, access to wider amenity and the right household demographics,” Alec Harper, head of Australia, Oxford said.

Located at 3 McNab Ave, the property is immediately adjacent to Footscray station, close to Victoria University, and a 15 minute commute to the Melbourne CBD. The area is expected to experience strong population growth that will be boosted by the planned $1.5 billion redevelopment of the Footscray Hospital.

“Ultimately, we are looking to deliver developments that will revitalise a site and its surrounding area and establish build to rent accommodation as the leading residential rental option in Australia,” James Greener, fund manager, build to rent, Investa said.

Oxford’s acquisition lands just one week after the Victorian government announced 50% land tax discounts for build-to-rent developments from 2022. The move followed a similar initiative unveiled by the NSW government in July.

“Pleasingly, Australian state governments are starting to realise the potential of the sector and the important role it can play in the COVID-19 recovery and in dealing with housing affordability issues,” Investa’s chief investment officer, Peter Menegazzo said.

“The Australian build to rent sector has been identified as one of the most attractive institutional investment opportunities globally. State tax reforms being considered or as is the case in NSW – being implemented, are removing a significant barrier for the sector.”

“With a growing pipeline of projects and increasing interest from investors looking to make an investment into the sector, we are considering opportunities to bring in capital partners alongside Oxford’s equity to help fund the portfolio’s growth – underpinning Oxford’s commitment to build a significant build to rent portfolio in the gateway cities of Sydney and Melbourne.”

Meanwhile, Qualitas has partnered with developer Tim Gurner for a $1 billion build-to-rent development fund that will begin with three projects in Melbourne totalling over 1,100 units.

Qualitas launched the $1 billion Build-to-Rent Impact Fund early in the year, with a $125 million backing from the federal government’s Clean Energy Finance Corporation.

As part of its new venture, Gurner will undertake deliver of the projects of and manage them following completion. Projects in Sydney, Brisbane, Adelaide and New Zealand are also planned.

On other side of the country, the Australian arm of American development and real estate investment firm, Sentinel Real Estate has submitted a development application for its latest build to rent project in Perth’s Scarborough.

This will be Sentinel’s third project in the Australian market, and follows its Element 27 project in Subiaco. The first phase of Element 27 has been operational and tenanted since early 2019.

The new proposal is for a 17,221 sqm mixed-use development at 194 West Coast Hwy, on the corner of Manning St that will be developed, leased and managed by Sentinel. It features a single 21 storey build to rent tower with 175 apartments, with a mix of studio, one-, two- and three-bedroom floor plans, atop a three-storey mixed use podium.

There are also plans for expansion and upgrade of the surrounding public space, and 230 bike parking bays and 215 car parks.

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