Macquarie’s $500m build-to-rent foray Local to develop Melbourne site with more to come

The investment bank is backing a new venture that aims to own 4000 flats to rent out, starting with a big Melbourne development.

Property executives Matt Berg and Dan McLennan, backed by Macquarie Asset Management’s real estate division, have launched build-to-rent business Local Source: Supplied

Investment bank Macquarie has unveiled ambitions to pump $500m into a series of build-to-rent complexes around the country via a new joint venture that will operate under the Local brand.

In a twist on its reputation as the millionaire’s factory, the bank is pitching its first major foray into owning housing in Australia as being about including groups that have been left behind in the scramble for homes — and also about being green.

The residential property boom has helped the nascent build-to-rent sector to become one of the boom areas in the wake of the coronavirus crisis and has attracted big offshore players hungry to grow locally and listed players led by Mirvac.

Macquarie’s asset management arm has moved into the arena with the purchase of a site in Melbourne’s Kensington for about $50m via JLL and Colliers, where the venture it is backing is planning about 500 apartments as flagged by The Australian.

But this is only the beginning with Local targeting about 4000 units in development or finished over the next five years, which would give it ownership of 15-20 buildings across major capital cities.

Matt Berg and Dan McLennan, backed by Macquarie, have launched build-to-rent business Local.

The venture’s initial pipeline is focused on Melbourne and Sydney, with more opportunities in the Victorian capital as there are sites available and planning is easier.

In addition to Kensington, the venture is “well advanced” on another few projects in Melbourne and is also engaged on opportunities in Sydney, Brisbane, Adelaide and Canberra.

Macquarie has backed development ventures in the past but this is the first time it is aiming to end up owning homes for the long term.

The bank has teamed with property executives Matt Berg and Dan McLennan in launching the Local brand, which they are pitching as changing the Australian housing market, by incorporating impact housing and targeting zero carbon emissions.

Local is capitalising on both soaring home prices and increasingly tight rental markets which have created a generation of people looking to rent for longer tenures.

The Macquarie-backed business will seek to provide sustainable housing at an “attainable” price in an inclusive community for residents.

Local projects will have a targeted component of impact housing for key workers, such as nurses and hospitality workers, as well as people living with a disability and women over the age of 55 who are at risk of homelessness.

Local co-chief executive Mr Berg said that traditionally in developments, impact housing was segregated, without access to building amenities, and Local wanted to change that.

“We saw a real gap in the Australian market for a platform which not only delivered quality housing and commercial returns, but also actively embraced the opportunity to deliver genuine impact and inclusion,“ he said.

Local is chasing net zero operational emissions in its buildings, reduced embodied carbon and a 7.5 Star NatHERS rating, exceeding minimum standards and market practice.

Local co-chief executive Mr McLennan said there was a huge untapped potential in apartments by putting in sustainability features.

“For a conventional developer, these may not deliver increased sales prices and therefore get put aside. However, for us, a strong focus on environmentally sustainable design will deliver a better longer-term income stream, future-proof our assets and offer a genuine alignment with the values of our investors, customers, and staff,” he said.

A real estate venture managed by Macquarie Asset Management’s real estate division and comprising the bank and major global real estate investors, is intended to fund Local projects.

The Kensington project will comprise 500 apartments and is slated to be finished by the end of 2024. Local is actively growing its pipeline and is chasing new sites.

“We strongly support the build-to-rent sector in various parts of the world and believe it has significant potential to grow in scale in Australia, driven by demographics including a growing renting population,“ Macquarie Asset Management global CIO real estate Jelte Bakker said.

“Globally we are seeing changing demographics and an increased focus on sustainability driving an evolution in tenant demand.’’