Rent power: Brookfield to develop unit towers in Brisbane

Brisbane city and river aerial view.

Canadian giant Brookfield is targeting Australia as one of the key markets for its growing build-to-rent platform, and has identified sites in Brisbane to kick off its local operations.

The move by the giant alternative asset manager puts into place one of the last pieces of the puzzle for the company and the Australian development market.

Brookfield is one of the world’s largest investors and developers of multifamily products – as build-to-rent is known internationally. It has extensive holdings in the US and Europe, with a strong desire to grow in these regions, as well as Asia and emerging markets.

The move is tailored to its local operations, which bring extensive development and construction expertise through the Multiplex building business. The group built many of the towers on Australia’s city skylines, and the shift to build-to-rent is part of a broader global push in alternatives.

Brookfield has already successfully launched student accommodation projects here and owns retirement living operator Aveo, with build-to-rent to be scaled up to become a mainstay of the local operation.

The Canadian firm’s public move comes after the federal government announced it would lower the Managed Investment Trust withholding tax rate from 30 to 15 per cent for build-to-rent projects, prompting hopes the sector could help address the dire national housing supply deficit by sparking 150,000 new homes.

Brookfield will launch its local build-to-rent business in Brisbane. Picture: Supplied

Brookfield will develop new complexes and set up a platform which draws on its global skills in the area.

Shifting into Australia also brings it up to speed with many of its international rivals who have set up locally.

Many have big ambitions, but Brookfield is already one of the largest overall property owners, managers and developers.

Australia is viewed as almost uniquely well positioned to grow institutional build-to-rent product, partly as it catches up to well-established offshore markets. But conditions, including a housing shortage, rental price spikes, difficulties in building traditional apartments, and even the slowdown in office buildings that were once the mainstay of many institutional businesses, have created ideal conditions.

Swarup Katuri, a managing partner in Brookfield’s Real Estate Group, responsible for business development and investment activities in the multifamily sector, said the company had a large global presence in housing which it was looking to grow.

It owns about 61,000 apartments, mainly in the US, but is also in Europe, Brazil and China.

“We’re looking to actively grow it everywhere else in the world,” he said.

After two-and-a-half years investigating the local sector, the company is now looking to activate the sites it owns “in pretty short order”, Mr Katuri said.

“We’ve progressed two sites that we own in Brisbane in conjunction with our team in the US to design the product,” he said. “We will be ready to go vertical on that, either at the end of this year or early next year.”

Mr Katuri said the group had experience across a wide range of markets with different levels of maturity, giving the firm experience in dealing with any “teething problems” faced locally.

“We will bring a much better product than people already have here,” he said.

The Palaszczuk government is backing three developments via its Build-to-Rent Pilot Project in the Brisbane area, which will deliver more than 1200 new dwellings. Picture: Supplied

Brookfield has owned the pad sites for a couple of years and a local team, led by head of real estate investing Australia, Ruban Kaneshamoorthy, has worked with Brookfield’s 700-person US business on refining plans.

Mr Kaneshamoorthy noted the strength of Brookfield’s “development DNA” across different sectors, which would give renters greater certainty about building quality.

The firm would also benefit from being able to unlock more mixed use development sites, alongside its retirement and student accommodation arms.

“Having multifamily is another facet which means that the sites we can unlock in great locations is a real advantage as well,” he said.

Brookfield’s ability to access large pools of capital via its own funds or with capital partners also gives it the opportunity to operate at scale. “We think it will really give us an advantage in the market,” he said.

Mr Kaneshamoorthy said the first projects would be premium-style products in good locations, with further opportunities led by developments.

Brookfield will establish its own platform, but could work with partners in future as the local sector takes off and the 21 operating platforms already here consolidate.

An Ernst & Young study estimated that the build-to-rent sector in Australia had hit $16.87bn, equating to 0.2 per cent of the residential housing sector, providing a guide to the dramatic growth in future potential.

Most of the 72 projects within the pipeline are located in Melbourne, but Brookfield’s move shows that Queensland is becoming a greater focus for the nascent industry.

The Palaszczuk government is backing three developments via its Build-to-Rent Pilot Project in the Brisbane area, which will deliver more than 1200 new dwellings. Up to 490 of those will be provided at discounted rent.

Fraser Property Australia’s subsidised rent projects is ready to get off the ground with a 25-storey tower dubbed Brunswick & Co in Brunswick St, Fortitude Valley, bottoming out. It will be one of the largest rental complexes in the Queensland capital, with 40 per cent or 144 of its units dedicated to subsidised rentals.

Cedar Pacific is also advancing on a 470-home development on the site of the former Children’s Court at 50 Quay St under the government’s pilot project. Up to 250 of the apartments will be available at a discounted rent. The developer is working with build-to-rent management specialist Essence Communities on the 32-storey building.

Cedar Pacific CEO Bernie Armstrong said the company would draw on its experience of developing and operating thriving communities in partnership with Essence Communities to deliver a successful Build-to-Rent project at 50 Quay Street, while also creating long-term value for their investors.

Mirvac’s proposed project, LIV Newstead, which will have about 390 high quality rental apartments, is also progressing. And in further action in Brisbane, the Vita business has two projects getting under way.

It is planning a nationwide portfolio of 4500 build-to-rent units with a focus on lower-income renters and is first getting underway at 186 Wickham St in Fortitude Valley. Others are seeking capital partners to back their growth.

Operator Arklife has put its portfolio and a slice of its management platform up for sale, with the $800m offer to be chased by global players. The group is looking for a strategic investor as it expands nationally to support housing supply in key cities, with the move coming as big domestic and international capital get deeper into the hot area.

Brookfield’s shift into the sector may prove to be one of its biggest-ever plays.