Housing capital: big funds step up for residential plays

Stockland is planning a build-to-rent project as part of its Triniti development at North Ryde.

The dramatic rise of institutional players in new forms of residential real estate is being locked in with big groups advancing projects and one of the largest shopping centre trades of the year being underpinned by the rental apartments which are part of the complex in Canberra.

The traditional focus on selling apartments is being up-ended as big developers take more of a focus on build-to-rent apartments, affordable housing and land lease estates as they try to get projects going that will help address the housing crisis.

Big institutions are partly driven by the imperative of getting projects moving in the face of soaring construction costs and higher rates, but they are also making a longer term bet on the increasing value of residential estate.

In a sign of the shift in values, Aware Real Estate has snapped up Dickson Village and a complex of 140 build-to-rent units in Canberra for $157.5m in one of the first transactions of its kind.

The move provides an indication of the uplift that shopping centre owners are chasing as they forge into the build-to-rent sector and the willingness of institutions to acquire completed projects as they expand.

Artists impression of Dickson Village which has been sold to Aware Real Estate.

Aware is already a major player in affordable housing after buying sites in Melbourne and Sydney and Canberra adds to its pipeline.

Community groups are also working with developers as they switch commercial schemes to provide housing for essential workers, with Third.i striking a deal in Sydney with Evolve Housing.

Listed groups are also expanding with Stockland unveiling its build-to-rent strategy as it moves on a major project in Sydney’s northern suburbs and Mirvac commits to expanding in the “living sector”.

In Canberra, Dickson Village was sold for $157.5m to Aware Real Estate, the property platform for Aware Super and its real estate partner Barings.

It was sold by prominent ACT developer Tony Pan of TP Dynamics. This institutional grade mixed-use project hit practical completion last month and is anchored by a neighbourhood retail centre tenanted by Coles.

But the real kickers were the 140 build-to-rent apartments designed and developed for Canberra’s tight rental market.

The apartments are held in a whole building of six storeys above the neighbourhood retail centre on ground level.

The price reflected a 6 per cent fully leased forecast yield for the retail centre and the apartments, which benefit from being in Canberra’s inner-city. The deal was brokered by CBRE’s James Douglas, Nic Purdue and Tristan Cotchett, and TP Dynamic’s Mr Pan said the asset would “prominently feature” in Canberra’s institutional investment market.

Property developer Third.i and Evolve Housing are planning $130m of affordable housing in Crows Nest. Picture: Supplied

Aware Real Estate chief executive Michelle McNally said the opportunity exemplified the group’s investment strategy of targeting locations around existing and new infrastructure that “we believe drive long-term demand and underpin capital growth”.

Barings executive director Shaun Hannah said the high-quality mixed use residential and retail asset will benefit from gentrification and infrastructure.

Mr Douglas said Aware’s acquisition of Dickson Village was a “highly strategic” investment, underpinned by what is forecast to be a high performing Coles supermarket on a long-term term lease and build-to-rent units which are expected to be high demand as a result of Canberra’s historic low residential vacancy rate.

Mr Purdue said high-quality assets such as Dickson Village were “rarely traded”.

“The project’s completion is well-timed to capitalise on strong rental growth in the Canberra residential sector, underpinned by the low level of vacancy and increased demand from the private and health sectors, as well as the student market,” he said.

Other private developers are teaming up with community housing experts on their projects. Third.i and Phoenix Property Investors have switched the focus of the Hume Place over-station project at Sydney’s Crows Nest to provide healthcare workers with affordable housing valued at more than $130m.

They have teamed with Evolve Housing and have proposed to allocate 15 per cent of the mixed-used development to nurses, midwives, health professional and services staff working at nearby Royal North Shore Hospital and other health facilities.

A study commissioned by the pair shows that local health workers and services staff are being forced to travel between 30–50 kilometres to get to work every day or night.

“We have a housing crisis that is becoming a health crisis,” Health Services Union secretary, Gerard Hayes, said. “Essential health workers are already making the tough decision to leave the sector in search of work closer to home.”

Evolve CEO Lyall Gorman said that with crippling cost-of-living pressures, the majority of healthcare workers simply cannot find housing or afford to live near north shore facilities.

Third.i director Robert Huxley said the Hume Place development could help address the area’s chronic shortage of quality, affordable housing.

The developers are looking to change part of their scheme from offices and cited the decreased demand for commercial space and urgent need for additional residential density.

Mr Huxley said the “in kind and in perpetuity” agreement with Evolve was a unique offering in the industry and provides a foundation for the creation of up to 500 additional affordable dwellings. Listed developers are already active nearby.

Stockland is advancing a build-to-rent project in Sydney’s Macquarie Park precinct and has unveiled the towers it is planning as part of its North Ryde “Triniti” development.

Stockland is planning a build-to-rent project as part of its Triniti development at North Ryde.

The scheme will be on a now vacant one-hectare site on Delhi Rd, next to its existing business park, near North Ryde Metro station. Stockland executive general manager of apartments, Ben Christie, said the company intended to deliver a highly connected mixed-use precinct.

Mr Christie said Stockland was working with Koichi Takada Architects on the sustainable design which includes a 5 star Green Star target, 7 star NABERS target (National Australian Built Environment Rating System), fully electric buildings with a commitment to a fully renewable energy base build.

“Stockland would be one of the first developers to transform an existing commercial site into a true mixed used precinct, in a model that aims to create more diversity of housing supply and ease affordability pressure for many people in the state,” Mr Christie said.

“We’d like to significantly improve the vacant and under-utilised lot with high quality build-to-rent apartments with large open spaces, and which is close to employment and convenient public transport,” he said.

Mr Christie said with about one-third of Australia’s population housed in the rental market, a significant portion of the community want to rent in major cities, but rental security was challenging.

“One solution to improve housing supply is to build quality, well located homes in communities that are close to transport, jobs, schools and amenities and lease them directly to the residents,” he said.

But it is not a panacea. “Build-to-rent is just one part of the solution for more affordable housing, giving more people the chance to live securely in some of the best places in our cities, with infrastructure and many services already in place,” he said.

Rival Mirvac this week also reiterated its commitment to the living sector, and it will launch into the new-style land lease project in Brisbane, adding to its dominance in build-to-rent.

Mirvac CEO Campbell Hanan said the company would have customers when they entered the market in build-to-rent and then could buy a home, and then be offered a land lease home in retirement.

Housing has changed, and the big institutions are here to stay.