Cedar Pacific launch new BTR project – Image: Supplied
  • Cedar Pacific to raise $500M for a new build-to-rent venture
  • Migration pressures highlight the need for managed rental options in Australasia
  • Projects to begin in Brisbane and New Zealand

Brisbane-based fund manager, Cedar Pacific has appointed Savills Capital Advisors to raise $500 million for a new seeded build-to-rent (BTR) vehicle.

Cedar Pacific’s new BTR vehicle has a pipeline of two seed assets totalling 833 units already under control 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 Auckland’s Central Takapuna, 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.

Cedar Pacific has partnered with McConnell Property for the development opportunities in New Zealand.

The investment strategy will target assets in key capital cities including Sydney, Melbourne, Canberra and Perth with all properties targeting a minimum 5-star Green Star rating. While the project comes at a time when the Federal Government announced it would be cutting the withholding tax rate for newly constructed residential build-to-rent projects.

Image: Supplied

Help with Australia’s growing population

Bernard Armstrong, CEO of Cedar Pacific, said affordable and professionally managed housing is key to a growing population, fuelled by millennials, older Gen Z’s and the return of higher immigration numbers.

“We are passionate about creating positive investment opportunities with responsible social and environmental factors,” said Armstrong.

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

With Australia’s national residential vacancy rate remaining at its lowest point on record in March 2023, at 0.8%, and available rental inventory in Auckland at its lowest in five years, the sharp increase in immigration is going to continue to put the housing market under extreme pressure.

Heavy immigration has underpinned demand for housing, with Melbourne, Brisbane, Sydney, Canberra and Auckland in particular expected to grow 1.2 to 2.2% per annum to 2029, outpacing forecast growth in major cities in competing developed economies.

The consistent GDP growth, coupled with low housing affordability is anticipated to drive demand for professionally managed rental options.

High interest rates hurting

Conal Newland, Head of Operational Capital Markets, Savills Australia and New Zealand, said the feasibility of new development projects in the sector is experiencing challenges with the current interest rate environment and the recent increases in construction costs.

“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,” said Newland.

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

Conal Newland – Image: Supplied

Established sector overseas

Joe Guilfoyle, Co-Head of Savills Capital Advisors, said the build to rent sector, whilst relatively new in Australia and New Zealand, is firmly established in UK and Europe and could help with a growing population.

“Due to similarities between these markets we anticipate strong interest from institutional investors both in Australia but also internationally,” said Guilfoyle.

“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.”

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