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17 Jan 2022

$500 Million for Melbourne Pipeline from New Build-to-Rent Player

$500 Million for Melbourne Pipeline from New Build-to-Rent Player

Alt Living, a newly formed build-to-rent platform, believes it will be able to finance $200 million in order to start construction on two build-to-rent projects in downtown Melbourne this year.

Landream, a Melbourne-based developer, has funded the firm and announced plans to convert a number of its residential properties from build-to-sell to build-to-rent in early 2020.

Kevin Li and Kim Pham, members of Landream's executive team, will now lead the Alt Living platform's development team, which will be led by Toby Pope, a Melbourne-based developer with a track record of developing residential and commercial projects.

Alt Living's first development, according to Chrystan Paul, formerly managing director of co-living platform Hmlet, will be at 100-106 Franklin Street in Melbourne's CBD, a property purchased by Landream for $30 million from residential developer Burbank in late 2020.

Paul stated, "We were planning to launch Alt Living in April 2020."

"However, due to the unpredictable nature of the pandemic, we paused and in doing so gave ourselves some additional time to strengthen our conviction, refer to emerging data across the nascent build-to-rent sector, and most importantly, source the right capital and partners to fill out our pipeline."

The $100 million Franklin Street project, designed by Bates Smart, was originally submitted to Landream in May 2020, but it has now been transferred to Alt Living.

The two-building property is close to the Queen Victoria Market and on the outskirts of the university zone. Landream purchased the biggest one, 100 Franklin Street, from residential developer Burbank in late 2020 for $30 million.

Alt Living will expand on Landream's concept, which includes a 40-story tower with 267 build-to-rent apartments, shops, co-working space on the lower levels, and a public basketball court.

Landream has also supplied the new platform with funds to secure a second property at 11-41 Buckhurst Street in South Melbourne.

The 2400sq m plot has a 70m street frontage on Buckhurst Street and spans seven low-format houses.

Alt Living is in talks with Port Phillip Council to expand on a previous approval for a 20-story, 20,900-square-meter mixed-use development, with plans for 200+ apartments.

"The building's typology has been heavily influenced by our project's location in South Melbourne," Paul explained.

"In comparison to our project on Franklin Street, which will provide more one- and two-bedroom configurations, we have looked very closely at the sort of end user presently existing in South Melbourne and are going to create larger apartments."

According to Paul, build-to-rent was fast establishing itself in Australia, progressing from infancy to maturity throughout the course of the epidemic.

"Many investors and market players have been shocked by build-to-durability rent's not only in Australia, but internationally, throughout this unprecedented epidemic," Paul added.

"Looking at rental statistics from the United States, a country where build-to-rent is well-established, it has stayed extraordinarily strong, with very little turnover.

"Global investors with agnostic mandates across many countries are increasingly eyeing Australia as a bright spot in which to invest."

"As part of our post-Covid growth story, we have a chance to truly take advantage of the tailwinds produced by migration being delayed for two years."

The platform is now raising up to $200 million in equity to support existing and future pipeline projects in Melbourne and, eventually, Sydney, which will be created and run in collaboration with institutional investors.

"Whether we like it or not, there will be a scarcity of rental houses in the future years owing to a building slowdown or developers unable to get projects off the ground due to a lack of capital for specific sorts of items," Paul said.

"The industrial asset class has grown in strength over the last several years, but for investors looking to hedge their bets in a commercial asset, build-to-rent provides a chance to purchase into an asset class with thousands of micro-tenants rather than just one or two, providing diversity."

"Build-to-rent assets enable investors with pension funds as constituents to distribute cash to their members quarterly, allowing them to satisfy their own pension fund commitments more easily."

Both of the developer's seed projects are anticipated to start building in the second half of 2022, with completion in mid-2024.