Mirvac, PEP team to snare Serenitas in $1bn land lease play

The land lease sector is surging as big players get set in the area as customers chase new options amid the housing crisis.

Listed developer Mirvac Group has teamed with private equity firm Pacific Equity Partners to launch into the rising land lease property sector, aiming to add affordable housing to its arsenal as major companies address the housing crisis.

The company, which is famed for luxury apartments, has already forged into build-to-rent apartment towers, targeting the emerging generation of renters locked out of the market, and is now looking to provide affordable options for retirees.

In a deal unveiled on Wednesday, Mirvac has joined with Pacific Equity Partners Secure Assets and existing co-owner Tasman Capital Partners to acquire the Serenitas portfolio for $1.01bn as Singaporean sovereign fund GIC exits.

The move, foreshadowed by The Australian’s Data Room, shows that big property firms are adapting to the affordability crunch. Rival Stockland moved into the field two years ago with the acquisition of the Halcyon business and both developers are racing to unlock more opportunities across their massive land banks.

Mirvac flagged the opportunity to work with its newly-acquired business to unlock land lease across its portfolio and to work with the private equity group to expand the business. The listed player also sees the chance to eventually buy out the PEP fund, although Tasman Capital will keep a minority state in the platform, which it has the right to lift.

“Australia has a critical supply shortage of housing, against a backdrop of very significant immigration and incredibly low residential vacancy rates,” Mirvac CEO Campbell Hanan said.

“This asset class - land lease - is just another housing typology that really helps ease the burden of the housing supply constraints that the market is facing,” he said.

Mr Hanan commended the government’s target of 1.2 million new homes over the next five years and that land lease was “another piece of the armoury to fill in this housing supply shortage gap”.

He added that the company was one of the few companies that was right across all facets of the residential sector, via both development and collecting development.

Mirvac will make a $300m initial investment, with $240m funded on settlement and $60m deferred for 12 months, and is expecting double-digit returns. The deal is a joint venture in which Mirvac and PEP hold 47.5 per cent apiece, with the minority interest held by Tasman.

Serenitas is a national platform with 27 estates with more than 6,200 sites, including more than 4,200 occupied and about 2,000 sites to be developed, 98 per cent of which are development approved. The Serenitas team, led by chief executive Rob Nichols, will continue to run the estates.

The Serenitas portfolio was keenly sought with big name players Macquarie, Brookfield, Hometown, Stockland and Warburg Pincus also looking at the business.

The business was formed when GIC and Tasman Capital Partners bought Western Australia-based National Lifestyle Villages in 2018 from Navis Capital and Blackstone.

It owns land lease communities including Thyme Lifestyle Resorts, National Lifestyle Villages (the market leader in WA), The Vantage at Vasse, The Outlook at Albany and RV Homebase Fraser Coast, and a pipeline under development.

Mr Hanan said the deal would make Mirvac one of the largest owners in the attractive land lease community sector. He said PEP and Tasman had a strong track record in building and institutionalising portfolio companies and were highly experienced in executing business acquisitions.

Serenitas CEO Rob Nichols said the deal would “grow and elevate” the Serenitas portfolio of brands and lifestyle experiences for customers. “There is certainly a growing awareness of modern land lease communities across Australia and the benefits available to customers, which will no doubt drive future demand,” he said.

Mirvac is already forged deep into build-to-rent and is developing its own pilot land lease estate in Brisbane, but the move will propel its ambitions of being a leader in the “living sector” which is emerging alongside traditional house and land packages and units.

“Our expansion into the living sectors comes against a backdrop of critical housing under-supply, and tailwinds including rising population growth, record low rental vacancy levels and affordability challenges,” Mr Hanan said.

“Our existing apartment and master-planned communities product are beneficiaries of these fundamentals, and our build-to-rent portfolio and expansion into land lease are natural adjacencies to our residential capabilities,” he said.

Mirvac has been selling down some city office towers and is also chasing partners for its next round of big developments, including a planned $2bn tower at 55 Pitt St in Sydney.

Investment bank Goldman Sachs advised on the sale of Serenitas and Rothschild & Co acted as adviser to Mirvac and Pacific Equity Partners.

The transaction brings together one of Australia’s leading REITs with one of a top private equity firm as they both look to expand in the sector.

Mirvac shares closed 1c higher at $2.08 on Wednesday.