Mirvac has appointed investment bank UBS to seek off-market expressions of interest from institutional groups to form a club to develop and own build-to-rent housing in Australia.
A global roadshow is set to get under way this month, The Australian Financial Review has advised where the "magic number is 4.5 percent."
It's the upfront yield expected as Mirvac seeks a place within the long-hold residential investment property sector which has been thought to be too difficult in Australia partly because GST and tax on residential property income.
Hithertoo a developer like Mirvac built their apartments just to sell them, not to hold them back and rent them out.
Seed project
Forecast total cost | $163m |
Forecast value on completion | $179m |
Forecast completion date | June 2020 |
Forecast number of apartments | 257 |
Forecast initial fully let net property yield | 4.5% |
Seed project + option projects
Forecast total cost | $668m |
Estimated value on completion | > $750m across 4 projects |
Australian BTR Club
Forecast equity commitment | $164m |
Target total equity investment over time | $1b |
Location | Initially Sydney* |
Forecast initial operating cash yield* | 4.0% |
Forecast unlevered stabilised IRR* | 10.0%+ |
Initial gearing (upon seed project completion) | Nil |
Mirvac co-investment stake | 10% |
Initial term | Development period of seed project + 7 years |
Delivery model | Full development exposure |
* With exposure to other Australian capital cities over time
According to a presentation sent to prospective investors, Mirvac is looking to raise about $164 million, initially to fund a seed project in Sydney Olympic Park.
The club will also be granted a first right of refusal over an additional three projects along the eastern seaboard with a total estimated value on completion of about $750 million.
The expected total project investment value is $1 billion over time, in major capital cities. Projects will have at least 100 units and include dedicated management staff, and high-end amenities, all characteristic of build to rent projects.
The club is looking at an initial fully let net property yield of greater than 4.5 per cent. Over the longer term, a forecast 10 year un-levered stabilised return of more than 8.5 per cent is expected.
Under the build-to-rent model, institutional groups apartments blocks to lease on a long-term basis.
Build to rent is thriving in the US and in Europe but is a new asset class in Australia.
The US market known as "multi-family" has been in place for 40 years with 250,000 units completed each year.
Australia's REST Superannuation has 3000 build-to-rent apartments in the US operated by Greystar.
