Novus snaps up city site as build-to-rent tops $1bn

The specialist operator is capitalising on the woes of traditional developers amid the housing crisis.

The build-to-rent revolution sweeping the property sector is picking up momentum, with local group Novus picking up a site overlooking Melbourne’s Botanical Gardens which was to house a luxury tower scheme promoted by a Chinese developer.

Novus has instead bought the undeveloped property from Wuzhong International, with the Chinese developer dumping plans to debut in the Australian housing market with a $160m apartment development called Bowen & Queens in South Melbourne.

Novus will instead develop a new style build-to-rent tower, with a similar number of units aimed at the premium end of the market.

Big companies including Stockland and Canadian group Brookfield have unveiled build-to-rent plans just this month, with the principals of Scape also joining the push for the new towers, which are billed as part of the solution for housing affordability.

Build-to-rent developers are moving rapidly than traditional unit players, as they often have a backing from cashed up offshore pension funds. By contrast, many build-to-sell developers have stalled as they need to rely on hard to come by pre-sales and bank finance at a time when lenders are clamping down.

The property bought by Novus is 2 Bowen Crescent and carries plans by Plus Architecture. It is near the soon-to-be completed Melbourne Metro Anzac Station, a potential drawcard for future tenants.

The project was acquired with an existing build-to-sell permit approval for 214 apartments and will be redesigned into a build-to-rent complex with 212 apartments plus extra facilities.

The project will be an all-electric building, powered by renewable generated green power, and will exceed National Construction Code energy efficiency requirements. It has solar PV panels and top energy-efficient systems with building is due to start in early 2024.

In just two years, Novus has built up a portfolio of built build-to-rent projects across Australia. It has projects underway in Melbourne’s Southbank and Sydney, where it has sites planned in Parramatta and Chatswood. More sites are in due diligence in Sydney, Melbourne and Brisbane.

The new project, dubbed Novus on Bowen, has been acquired on balance sheet and will be used as a seed asset for Novus’ second build-to-rent investment vehicle after its initial fund won the backing of Britain’s M&G Real Estate.

“The tailwinds driving the growth of the build-to-rent sector in Australia continue to grow with increasing government support for the sector and record low vacancy rates,” Novus chief executive Adam Hirst said.

He said the site showed the important role the sector can play by “activating previously dormant planning approvals and adding much needed supply into the market”.

The local build-to-rent sector is poised to mature over the medium term, driven by rising home prices and demand for quality, purpose-built homes with service-focused property managers.

Strong population growth over the past 15 years is set to continue which, in addition to a structural under-supply of apartments, surging rental demand and affordability constraints has boosted the investment case.

“The existing location already benefits from proximity to Melbourne CBD, adjacency to both the Botanical Gardens and Albert Park and fantastic surrounding amenity,” Novus chief development officer Jason Goldsworthy said.

“These fundamentals align perfectly with our mid-scale convenience-based build-to-rent model.”

Originally published as Novus snaps up city site as build-to-rent tops $1bn