Superannuation giant ART rides build-to-rent wave as Mirvac’s $1.7bn fund takes off

LIV Aston by Mirvac in Melbourne’s Docklands.

One of the country’s largest superannuation funds, Australian Retirement Trust, is putting its weight into addressing the housing crisis by making one of the largest-ever investments in the emerging build-to-rent sector.

The fund has taken a near half stake in Mirvac’s $1.7bn property trust in the sector, picking up the interest from Japan’s Mitsubishi Estate, which had backed the Australian company’s build-to-rent strategy by becoming a cornerstone investor in mid-2023.

The deal is considered a shot in the arm for the whole sector as it brings substantial local capital into the area, after a period in which overseas investors had dominated when international build-to-rent developers entered the market.

The sector is now maturing with a wider spread of local and international players pursuing projects around the country, despite rising costs and some regulatory hurdles holding back projects. Local groups active in the sector include Goodman Group, which is rezoning sites, and Stockland, which is planning to develop in the build-to-rent area, along with big investors like Macquarie Group.

Mirvac chief executive Campbell Hanan is bullish about the tie up with ART. Picture: Tara Croser

Mirvac said it had expanded its relationship with ART after it acquired a 48.5 per cent interest in Mirvac’s $1.7bn LIV Mirvac Fund. The pair already have close ties in industrial and office property.

ART is invested in the Mirvac Industrial Venture, where it has a 49 per cent interest in Switchyard, Aspect Industrial Estate, and Stage 1 of SEED in western Sydney, as well as a 33 per cent interest in the South Eveleigh offices in inner-Sydney, and a holding in the Mirvac Wholesale Office Fund.

Mirvac chief executive Campbell Hanan said the super fund was a valued capital partner. “Today’s transaction is testament to our strong and deepening relationship, as well as a shared commitment to growing our build-to-rent portfolio, where we see strong tailwinds and significant potential for scale and growth,” he said.

The Mirvac venture is growing in scale as the concept takes off in more parts of the country. “Following the completion of LIV Anura in Brisbane and LIV Albert in Melbourne this year, LIV Mirvac is the largest operational build-to-rent portfolio and platform in Australia, with around 2200 apartments developed by Mirvac, and a clear strategy to grow this to at least 5000 apartments in the medium term,” he said.

Mr Hanan flagged that the fund, with ART and co-investors Clean Energy Finance Corporation, would “play a key role in achieving this target, helping to deliver much-needed housing supply in Australia’s key capital cities”.

“Australian Retirement Trust’s investment in the fund demonstrates significant support for our build-to-rent portfolio and our growth strategy, as well as confidence in the build-to-rent sector overall. It’s also great to see support from Australian super funds for housing in Australia,” he said.

Mirvac said the build-to-rent sector was expanding rapidly, with an estimated 39,000 apartments in the pipeline, valued at about $30bn, which Mr Hanan said showed a lift of about $9bn over the past 12 months alone.

“Today’s announcement is testament to the increased support from federal and state governments for build-to-rent, ensuring the right policy settings are in place to attract international and domestic investment to the housing sector,” he said.

ART general manager, mid-risk assets and UK, Michael Weaver, said the stake gave the fund an “excellent exposure” to one of the fastest growing asset classes in Australia, backed by strong market fundamentals and a positive growth outlook.

“We’ve been a long-term investor in build-to-rent projects in the US, and see this investment as an incredibly exciting opportunity here in Australia. This investment aims to contribute to housing supply locally, while delivering a return which is in our members’ best financial interests,” he said.

There have been relatively few trades of completed apartment stock in Australia, and the super fund’s involvement is a breakthrough that could prompt rivals to follow suit.

US investment giant Hines last year teamed up with Canadian pension fund Ontario Teachers’ Pension Plan to buy two build-to-rent blocks in Brisbane in a deal worth about $350m.

Aware Super is also buying the Brunswick & Co complex in Brisbane for around $285m. The asset is being sold by Singaporean property developer Frasers, which is undertaking the project under a pilot scheme supported by the Queensland government.

The deal-making shows that investors are willing to overlook the low yields that the assets generate, betting that the combination of rising rentals across major capital cities and increasing housing values will ensure high overall returns.