Hines Affirms Commitment to Aussie Living Sector After BTR Sites Put Up for Sale

Hines has made a strategic shift from developing Australian rental residential assets in favour of purchasing properties with near-term income potential, the US developer and fund manager said Tuesday, after local media suggested the company was retreating from the build-to-rent sector Down Under.

Confirming that Hines has put a trio of Melbourne development sites up for sale, the Houston-based builder told Mingtiandi that, together with its partner, the Ontario Teachers’ Pension Plan, the company is now focusing on establishing a portfolio of operating rental apartments under its Aussie BTR joint venture.

Hines remains “firmly committed to Australia’s living sector”, according to country head David Warneford, who pointed to the JV’s recent acquisition of two Arklife-branded Brisbane projects — one operational and the other under construction — as proof that Australian BTR continues to be a “key area of growth” for privately held Hines.

“Both the Arklife acquisition and our pivot to exit the three sites affirm our longstanding partnership with Ontario Teachers’,” Warneford said. “Hines is committed to working closely with our investors to help create value and offer more high-quality homes to tenants.”

Changing Course in Melbourne

Hines set up the BTR JV in late 2022 with Canadian pension manager Cadillac Fairview, which served as the real estate arm of Ontario Teachers’ until a restructuring last year brought the property investment operation in-house.

The venture set a target of A$1.5 billion ($960 million) worth of rental homes in Australia, including the seed assets consisting of three Melbourne developments — now seeking buyers — that were expected to deliver 850 units and have a value of A$820 million once completed and stabilised.

The biggest project of the trio is a 400-unit development spanning a pair of adjoining sites at 15-33 and 35-37 Bank Street in South Melbourne, which Hines acquired from mainland-backed developer Ousia Investments in May 2022 for a reported A$40 million.

Hines picked up that project 2 kilometres (1.2 miles) from the city’s financial district just three months after its February acquisition of a site along Macauley Road in northern Melbourne for a 200-unit complex. Hines paid A$30 million to acquire the 3,068 square metre (33,024 square foot) plot from a group led by Singapore’s City Developments Ltd.

The third asset is a site farther north in Brunswick purchased by Hines in August 2021 as the company’s first-ever Aussie BTR project for a reported A$16.5 million. The Brunswick site measures 4,247 square metres and is expected to yield 250 rental homes once completed.

Mingtiandi reported last month that the JV had completed the acquisition of the two Arklife BTR projects with a total of 354 units, including 89 in operation and 265 under construction. The operating property in Brisbane’s inner suburb of Fortitude Valley was completed in October 2021 and stabilised within six months, according to Hines, while the unfinished project in South Brisbane is expected to reach practical completion in the first quarter of 2025.

Fund Tweaks Portfolio

The JV is attempting to sell its trio of sites in a Melbourne market where BTR apartments comprise more than half the forecast apartment supply coming on stream in the next three years, the Australian Financial Review reported, citing research by Charter Keck Cramer.

The property advisory contends that BTR developers are better positioned to deliver supply compared with build-to-sell developers because they needn’t rely on pre-sales to get funding.

Ontario Teachers’ is revising its global real estate strategy and weighting the portfolio more towards income-generating assets in Asia Pacific after reporting a 5.9 percent loss on real estate investments last year — widening from a 3.5 percent loss in 2022.

The Toronto-based pension manager last year announced its intention to suspend investment in mainland China. Fund management head Stephen McLennan told a Canadian parliamentary committee that the group had paused direct investment in Asia’s biggest economy amid rising tensions between Beijing and Ottawa.

Through Cadillac Fairview, Ontario Teachers’ in mid-2021 committed $400 million to Hines Asia Property Partners. In 2022, Ontario Teachers’ was among a group of investors joining a $505 million fundraising round for APAC data centre platform Princeton Digital Group.