Cash boost for luxury developer Tim Gurner with $1.75bn build-to-sell fund
Melbourne’s Jam Factory is in Tim Gurner’s scope.
Luxury developer Gurner has secured a $1.75bn fund for its build-to-sell business, after obtaining unprecedented institutional capital of $400m from a global institutional investor to develop build-to-sell sites across Australia.
The raising is a dramatic step up for the already expanding luxury property business, with company founder Tim Gurner outlining plans for a capital light model that would propel the company into the top tier nationally.
The company has already become a major player along the eastern seaboard, as well as expanded into Adelaide and Perth, and shifting to this style of operation would give it the firepower to take on even the largest developers.
Mr Gurner said the company wanted to be positioned so it could pick up city-shaping developments such as Sydney’s Barangaroo and believed the fund would give it the capacity to move rapidly on opportunities and could grow in future.
At the same time, the luxury group believes values of development sites are sliding and it is keen to stock up and then develop so they come on market at a time when a shortage is expected later this decade.
Gurner Group’s Budds Beach, Gold Coast, project.
Mr Gurner wants his business to look more like top-listed operators with a capital light model his ultimate ambition. But he wants to also keep a proprietorial focus on having the best luxury projects and to keep his business nimble.
“It would be very similar to what Charter Hall, Goodman and Westfield have done so well, which is a funds platform – a capital light platform that allows us to operate like them,” he said.
Under his vision, Gurner would become the destination for institutions looking to back residential property across a range of sectors.
“That might be co-living, it might be student accommodation, it might be hotels, it might be build to sell, it might be build to rent. We want to have the largest funds and platform in that space,” he said.
Mr Gurner said the latest fund would put it at the top tier of build to sell developers. “It allows us to really compete and realistically have a balance sheet on par with the public companies,” he said. A residential development fund “had never really been done in Australia before” on an institutional scale, he said. Public companies had tried to launch similar vehicles – some have super funds and pension groups backing specific projects – but were not able to launch open-ended funds.
Mr Gurner said the asset class had been seen as a cyclical but the scale of the vehicle would ensure returns were steady for institutional backers, with a well-diversified line up of projects.
The funding deal will allow the business to add an additional $1.75bn in projects to its existing $10bn pipeline of current and future projects across its build to sell interests.
Over a decade Gurner has grown from an entrepreneurial brand to an institutional-grade corporate business and spans multiple divisions, including build to sell and build to rent property development, hospitality, wellness and operations.
Gurner Group founder Tim Gurner.
Gurner Group has also grown to more than 90 people across offices in Melbourne, Sydney and now Brisbane, with former Southern Cross Austereo CFO Nick McKechnie appointed as the Gurner CFO.
The capital raise is a big step forward in Mr Gurner’s decade-long strategy to transform from a private property business into an institutional-grade developer, fund manager and multi-platform lifestyle brand.
The private operation is also aiming to fill what it sees as a large gap developing between the listed and private residential developers, due to the large requirement for capital. Gurner has started to fill that void by picking up a number of large mixed use sites off market, and striking partnerships with landowners.
“This capital raise represents a huge milestone as we continue to drive towards our goal of transforming Gurner Group into a fully diversified capital light developer, fund manager and lifestyle brand,” Mr Gurner said.
“This gives us huge dry powder now in the build to sell sector to focus on opportunities that arise out of the market dislocation that will occur in the next 12 months, specifically in Sydney as we grow our brand there while also supporting our Melbourne and Queensland endeavours.
“We believe the timing is ideal as the cost of capital and interest rates continue to rise, alongside substantial cost hikes in the construction sector, which we expect will create a lot of opportunities for us.
“We believe the next six to 18 months will be critical as many developers may struggle to hold on to sites … which will create serious opportunities for those who have the capital to act quickly.”
After a strong run of acquisitions, Gurner flagged it would continue its pursuit of sites across the eastern seaboard. “We are considering a vast range of opportunities that fall anywhere within the $30m to $200m land bracket,” Mr Gurner said.
The funding deal comes off the back of the developer’s $1.2bn build to rent fund secured in 2021, in partnership with listed alternative real estate investment manager Qualitas for the groups’ GQ BTR platform.
That platform has secured four seed sites totalling more than 1350 apartments and started on two major build-to-rent projects in Melbourne, with another Melbourne and Sydney site to kick off building in early 2023.
Mr Gurner also flagged further growth in the build to rent side. “We’ve almost spent the first fund already, so we’ll be looking to the second fund,” he said.
