Hines has acquired its second build-to-rent project in Melbourne, Australia for a reported A$30 million ($21.6 million) with the US developer taking over the development from Singapore’s City Developments Ltd (CDL) and a pair of local partners.
Hines is planning to develop 220 rental homes on its new site at 36-58 Macaulay Road, north of Melbourne’s central business district, with the Houston-based investment firm and builder expanding its Aussie platform as part of its global residential strategy.
“We are excited to continue to expand our efforts in the BTR space with our second project in Australia,” said David Warneford, senior managing director and country head of Australia at Hines. “Hines has deep global expertise in residential and BTR development, operations and investment management.”
The deal comes just six months after Hines first ventured into Australia’s burgeoning build-to-rent market in August last year with its A$16.5 million acquisition of a site in Brunswick, North Melbourne as more Australian professionals turn to rental housing in the face of rising home prices.
Taking Over in North Melbourne
Hines’ new project occupies a land parcel spanning 3,068 square metres (33,024 square feet) which CDL had paid A$18.5 million (then $17.4 million) to acquire in 2019, with an account in The Australian pricing the recent sale to Hines at A$30 million.
Together with local developer Lechte Corp and consultancy Crema Properties, CDL had initially planned to develop a twin-tower mixed-use apartment project dubbed “Arco” on the site, with the development consortium having engaged JLL and Colliers to jointly market the asset late last year.
Hines’ latest Melbourne prize can accommodate two buildings of up to 21,047 square metres in total gross floor area, according to marketing materials from JLL, with Hines having paid the equivalent of just over A$1,425 per square metre of accommodation, at the reported consideration. The planned apartment complex has an estimated end value of A$230 million, according to an account in the Australian Financial Review.
Located at the corner of Macaulay Road and Haines Street, the residential plot is accessible via a five-minute walk to the Arden Station and a 30-minute drive to the Melbourne airport, and is 1.5 kilometers (0.9 miles) from Melbourne’s central business district.
The Macaulay Road site is also 15 minutes’ drive from the project at 10 Ballarat Street in Brunswick which Hines acquired last year as its first build-to-rent venture in the country, with the company planning to build a 250-unit apartment complex worth A$250 million on that 4,247 square metre site.
Hines’ pair of Melbourne acquisitions follow the company’s hiring in May 2021 of Sam Bisla, formerly with local residential developer Grocon, as its head of living for Australia.
“Australian BTR is a key growth area for Hines and for investors globally. We are thrilled to be growing our platform in the region,” said Bisla. “36-58 Macaulay will deliver one of the highest-quality BTR projects in one of Melbourne’s most attractive residential locations.”
CDL Makes an Exit
While CDL did not respond to Mingtiandi queries by the time of publication, the Singaporean property giant has been actively disposing of assets outside its home market over the past year, as it continues to suffer losses in its Millennium & Copthorne Hotels division and works to erase the memory of S$1.9 billion ($1.4 billion) in red ink suffered in 2020.
During 2020 CDL already began paring back in Australian with the A$67.9 million sale of the 4.5 star Novotel Brisbane hotel by a hospitality trust managed by the company.
In December the Singapore property titan announced that it had agreed to sell the Millennium HIlton Seoul hotel for KRW 1.1 trillion ($930 million).
Aussie Apartments on the Rise
Hines’ bet on Australia’s rental housing sector comes amid a flurry of multi-family ventures by major funds, which are betting that rising housing prices and an increasingly urban population will continue to drive apartment demand.
In November, Australia’s Macquarie Asset Management was revealed to have committed A$500 million to a pipeline of build-to-rent developments in Melbourne, and in December, Canada’s Oxford Properties announced that it had agreed to take on a 434-unit Melbourne BTR project with local developer PDG Corporation as it expands its Indi rental apartment platform in the Victorian capital.
In September, US multi-family developer and fund manager Greystar said that it had won approval to build a 625-unit build-to-rent project in the Melbourne suburb of Yarra.
In its latest apartment market overview report, JLL’s Australian research team predicted that build-to-rent strategies will remain in favour with institutional investors and major developers in Melbourne, given the scarce supply of new homes in the city.
JLL is predicting apartment rents in the city to continue rising over the next 2-4 years on expectations of a rebound in demand on housing as students and migrants return, while stock of homes remains low.
“Development conditions remain challenging and as such JLL does not expect to see any material lift in new apartment supply for several years yet,” it said. “As developers have shifted to cater for the owner-occupier market, this segment of the market has now become quite competitive, particularly in targeting downsizers.”