US group Hines, Canada’s Ontario Teachers’ Pension Plan in $350m Brisbane apartment tower buy

The deal covering two build-to-rent apartment blocks is a breakthrough for the sector, which has been in limbo due to political uncertainty and rising construction costs.

The investors have teamed up on two build-to-rent apartment blocks.

US investment giant Hines has teamed up with Canadian pension fund Ontario Teachers’ Pension Plan to buy two build-to-rent apartment blocks in Brisbane in a deal worth about $350m.

The investment is significant as it is one of the first trades involving a completed tower of the specialist apartments, which are designed to be occupied by renters and owned by large institutions.

The offshore pair have completed the acquisition of the two build-to-rent assets, which will comprise a total of 354 units, once a second building is completed early next year.

The deal was first mooted by The Australian late last year, but getting commercial property deals done has been tough amid interest rate uncertainty and the political risks that the build-to-rent sector has faced as legislation on taxation of offshore investors remains stuck in the Senate.

The Brisbane acquisition fits with Ontario Teachers’ Real Estate’s “living strategy” in Australia, which targets buildings in markets near transport, employment hubs, and entertainment centres.

The portfolio comprises two buildings.

The first, 28 Robertson Street in Fortitude Valley, is an operational 89-unit tower that was completed in late 2021. It sports facilities including renewable energy, storm water recycling, high-performance acoustic glazing and low-energy LEDs.

The second, at 13-17 Cordelia Street in South Brisbane, is an under construction 265-unit tower that is expected to be finished in early 2025. The swanky complex will have a gym, rooftop pool, residents lounge, co-working space, private dining room, and a sky garden and is aimed at the premium market.

Ontario Teachers’ Pension Plan head of Asia-Pacific Real Estate Jun Ando pointed to more opportunities in the market

“With the Australian population expected to see continued growth and consumer preferences in the country moving more towards the rental sector, we see strong, long-term potential in the Australian multi-family market,“ he said. ”These assets provide us with a strategic entry point into Brisbane and, working alongside Hines and Arklife, we will look to offer a compelling value proposition for tenants and create value for our stakeholders through active asset management.”

Hines country head of Australia and New Zealand, David Warneford, said the acquisitions reflected its focus on actively pursuing build-to-rent opportunities in Brisbane, as well as in other key Australian cities with strong fundamentals.

“Hines sees tremendous potential in Australian BTR for both investors and residents. It’s poised to offer stable cash flow and income growth while helping to meet the demand for quality rental housing in the country,” he said.

Ontario Teachers’ Real Estate believes the living sector will benefit from strong macroeconomic tailwinds and favourable demand-supply dynamics and is invested in it in the US and Britain.

The buildings were sold by the private ADCO Group and were managed by specialist Arklife. That business and another Brisbane site were originally on offer but did not trade.

Hines will become asset manager and Arklife will remain as property manager for Robertson and Cordelia.

The deal was brokered by CBRE’s Stuart McCann and Andrew Purdon.

“This transaction marks another vote of confidence in the Australian BTR market. It highlights the growing confidence among global investors to deploy large equity tickets back into the real estate markets as interest rates look to compress and markets benefit from very strong rental growth dynamics as supply remains a challenge,” Mr McCann said.

Mr Purdon said Arklife has proven the develop and trade model even in challenging capital markets conditions. “The Arklife brand has created a very strong customer proposition and achieved excellent investment performance since the launch of Robertson Lane. Upon practical completion, Cordelia Street will be a leading example of BTR design in Australia,” he said.

The deal also shows that large foreign investors are willing to back the local build-to-rent sector and it is effectively a ‘proof of concept’ for the sector. But large operators say this year has largely been a “lost period” due to uncertainty about how build-to-rent will be taxed and the difficulties of getting projects off the ground as costs soar.

Large global investors want to come into the market but they had been waiting for transactions to ensure that assets held up.