Arklife seeks capital backer in $800m portfolio play as build-to-rent surges

The near $17bn build-to-rent industry is moving into its next phase as big capital chases portfolios.

Australia’s build-to-rent industry is set for one of the first trades of an established business, with operator Arklife putting its portfolio and a slice of its management platform up for sale, with the $800m offering 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 moves deeper into the hot property sector.

The Brisbane-based operator is one of the few in the country to have a site up and running, with more towers getting underway in the Queensland capital to take its portfolio to $800m.

The big attraction is a 50 per cent stake in the platform with a national expansion on the cards, which will lock in Arklife as one of the largest players in the rapidly maturing area that is shaping as a crucial factor in solving the nation’s rental crisis and the broader housing affordability issue.

The government’s announcement last month that it would lower the Managed Investment Trust withholding tax rate from 30 to 15 per cent for build-to-rent housing projects spurred hopes that it would take off and help address the dire national housing supply deficit.

An Ernst & Young study showed that levelling the withholding tax rate, in line with investment in other property asset classes, could create an extra 150,000 Australian homes over the next decade.

EY estimated that the build-to-rent sector in Australia has hit $16.87bn, which equates to just 0.2 per cent of the total value of the residential housing market, laying out a pathway for dramatic growth in future.

There are just 11 operating build-to-rent projects, nine of which are funded from foreign capital. Most of the 72 projects in the pipeline are located in Melbourne, followed by NSW, Queensland, and lastly WA.

Arklife sports a crucial advantage through its ties with top 10 builder ADCO, giving it the capacity to roll out new facilities even as input costs rise.

Arklife was set up in 2018 by its management team, led by Scott Ponton, a former Grocon and Macquarie Bank executive, and ADCO, one of Australia’s largest private construction and property groups. Arklife was one of the first Australian build-to-rent operators to run an operating asset. Arklife Robertson Lane in Fortitude Valley, Brisbane, opened in late 2021 and reached full occupancy within six months.

It has secured two more Brisbane-based purpose-built build-to-rent projects, which will take the platform to about 681 units. The three assets have an estimated value upon stabilisation of $800m.

The process for the platform is being handled by real estate agency CBRE’s Stuart McCann and Andrew Purdon. While they declined to comment, the Brisbane-based Arklife chairman Richard Carmont said that the aim was to raise capital and expand geographically.

“We have a unique skill to put projects together and deliver them,” he said. “Demand is strong as we’ve got a significant shortage of rental housing.”

The process will attract both local superannuation funds keen to display their credentials in housing, and international capital, which sees Australia as a key part of the global build-to-rent universe.

The offer comes as capital pours into the area with most major global and international companies now active in the areas. They were initially led by the listed Mirvac and Daniel Grollo’s private Home operation, but listed players including Lendlease and Stockland are getting active.

While the industry is still nascent, the opportunity to grow is coming into sharp focus as traditional build-to-sell developers still find it difficult to get projects off the ground with banks clamping down both on lending to developers and hitting buyers with higher interest rates.