Mirvac gets government fund backing for $1.8bn build-to-rent trust

The venture comprises Mirvac’s operational build to rent assets – LIV Indigo, Sydney (pictured), and the recently completed LIV Munro, Melbourne, as well as its build-to-rent pipeline assets

Listed developer Mirvac has locked in its premiere status in the rapidly growing build-to-rent sector unveiling a $1.8bn fund that will propel its new projects around the country as more players get into the hot field.

Almost all the major local developers have now proposed schemes and international funds managers have also set up, but Mirvac was the first local listed group to get into the area and has ambitions of reaching 5000 units.

Key industry players have warned of the potential fallout from so many developers looking to get into the area but governments are now turning to build-to-rent as the supply of traditional apartments stalls with interest rates on the rise and as borrowing gets tougher.

The listed group has garnered cornerstone investments for its fund from major institutions, including the federal government’s Clean Energy Finance Corporation, as well as from international backers, notably Japanese heavyweight Mitsubishi.

The move was flagged by The Australian in March and shows the growth potential of the emerging asset class at a time when traditional apartment construction is deeply lagging.

Mirvac will retain a 44 per cent interest in the venture, which has projects along the eastern seaboard and is a prime mover in a sector that is becoming a key part in addressing the housing affordability crisis.

Mirvac’s build-to-rent project at Sydney Olympic Park, LIV Indigo.

The venture comprises Mirvac’s operational build-to-rent assets – LIV Indigo, Sydney, and the recently completed LIV Munro, Melbourne, as well as its build-to-rent pipeline assets. These include LIV Anura, Brisbane, and LIV Aston and LIV Albert Fields, Melbourne.

Mirvac will provide investment management, property management, development management and construction services.

“We are thrilled to have established a new Build-to-Rent Venture with high-quality capital partners. Our ability to attract capital partners of this calibre is a great endorsement of the product we deliver and reinforces our reputation as a trusted partner,” Mirvac chief executive Campbell Hanan said.

He said the company was Australia’s first large-scale owner and operator of build-to-rent assets, with around 2200 lots in its secured pipeline and an expected end value of $1.8bn.

“The establishment and capitalisation of the venture supports our vision to increase our exposure to the build-to-rent sector, grow our portfolio to at least 5000 apartments in the medium term, and play a key role in helping solve the housing and rental shortfall in Australia,” Mr Hanan said.

Investment bank Jarden’s Mitchell Schauer and real estate agency CBRE’s Stuart McCann and Andrew Purdon advised on the capital raising.

The deal represents the largest build-to-rent transaction in Australia’s history and is also viewed as a sign of confidence in the sector as much of the capital was sourced offshore.

CEFC head of property, Michael Di Russo, noted the environmental benefits the sector was bringing to housing.

“The build-to-rent sector is an emerging asset class in Australia with the potential for significant growth, as well as considerable scope to make a meaningful impact on the decarbonisation of the broader residential property sector,” he said.

He said the Mirvac developments would increase the supply of energy efficient housing, with each new development project targeting a minimum average of 7.5 star NATHERS rating and net zero carbon emissions in operations.

Federal Energy Minister Chris Bowen called out the importance of this shift. “The Albanese government wants all Australians to be able to save on energy, and save on bills, not just those who own their own home,” he said.

“Improving energy efficiency in these apartments is crucial in cutting power bills over the long term for renters, and today’s announcement adds to the $1.7bn in energy saving upgrades for homes, businesses and communities in the budget.”

The deal will help give Mirvac the firepower to source and secure new opportunities for the venture from a variety of sources, including from the company’s $30bn development pipeline, and through selective sourcing of off-market and on-market opportunities.

Both the scale of the fund and the advances that Mirvac has made by getting sites up and running early has given it the edge against competitors.

It also has the capacity to include build-to-rent elements in its mixed use projects, with rival Lendlease also taking this approach on some sites.

The returns in the sector have been sweetened by higher rents, as both international immigration and local populations are growing strongly.

The deal is a key market for Mirvac this financial year as it separately awaits the closure of major office sales in Sydney and Melbourne.