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Build-to-rent vehicle seeks $500m investment

By Juliet Helmke
29 May 2023 | 11 minute read
bernard armstrong cedar pacific reb wilgxm

A new build-to-rent offering from Cedar Pacific is seeking investments totalling $500 million to fund 11 assets in various stages of development.

Cedar Pacific, a Brisbane-based fund manager established by Pamoja Capital in 2015, has appointed Savills Capital Advisors to raise the funds. The Queensland firm has a history of developing and managing purpose-built residential rental assets, currently controlling 18 assets worth approximately $2.5 billion totalling more than 10,000 beds, primarily in the student accommodation sector.

The build-to-rent (BTR) vehicle has a pipeline of two seed assets totalling 833 units already underway with a further nine assets totalling 3,500 units, in its pipeline, including four with development approval. The two seed assets comprise a 39-storey tower with 358 new apartments located in Central Takapuna in Auckland, New Zealand and a 32-storey tower located in Brisbane Australia, which is set to emerge as the state government’s third pilot build-to-rent project, featuring 475 apartments of which up to 250 will be eligible for government-subsidised rent.

All properties will target a minimum 5-star Green Star rating or equivalent on construction and operate as net carbon neutral. Essence Communities, a subsidiary of UniLodge, will operate the completed BTR projects under a white label agreement.

The launch of the funding round coincides with the Australian federal government’s announcement of a reduction in the managed investment trust (MIT) withholding tax rate for newly constructed residential build-to-rent projects, which will allow foreign investors in qualifying jurisdictions like Singapore, Canada, Japan, the Netherlands, Germany, the UK, and the US to pay a reduced rate of withholding tax on “fund payments” in relation to BTR projects in Australia.

Bernard Armstrong, chief executive officer of Cedar Pacific, commented that the tax changes would do a lot to incentivise projects such as this.

“The recent reform of MIT will go far to encourage investment into the growth of a sector that can respond to our housing shortage.”

Joe Guilfoyle, co-head of Savills Capital Advisors, added that the BTR sector was a source of untapped potential.

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“The build-to-rent sector, whilst relatively new in Australia and New Zealand, is firmly established in UK and Europe. Due to similarities between these markets, we anticipate strong interest from institutional investors both in Australia but also internationally. We anticipate attractive risk adjusted returns in the BTR sector in Australasia due to forecast rental growth as the market matures over the next few years.”

But as Conal Newland, head of operational capital markets for Savills Australia and New Zealand noted, the time required to develop BTR projects means that it will be a while before investment opportunities amp up in response to the tax changes.

“The structural undersupply of purpose-built residential assets in Australia and New Zealand looks set to continue into the medium term given lead in times to deliver new projects,” Mr Newland said.

“Taking into consideration these obstacles, we expect strong demand for this opportunity.”

ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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