Scape aims high with build-to-rent empire of 10,000 apartments

The principals of student accommodation group Scape have unveiled ambitions to assemble a $5bn empire of build-to-rent complexes across the country.

Scape Australia is aiming to expand from student accommodation with plans to assemble a $5bn empire of build-to-rent complexes across the country. Picture: NCA NewsWire/Bianca De Marchi

The principals of student accommodation group Scape have unveiled ambitions to assemble a $5bn empire of build-to-rent complexes across the country as they look to capitalise on their expertise in developing and managing high-rise living complexes.

Scape Australia principals Stephen Gaitanos and Craig Carracher, who founded the group that went on to become the largest operator in student housing a decade ago, also have out-sized ambitions in build-to-rent.

“Our ambition is to democratise the rental market by leveraging our operational scale and delivering inspired intelligent design experiences at value like no other operator in the market. As the leading local operator in the residential for rent sector, we have a clear and scalable value proposition for multi-family in Australia,” Mr Carracher said.

The pair have already made Scape Australia into a fully integrated property business that has about 33 assets with 16,300 apartments, with another 12 under development that will have another 10,000 apartments.

They are the latest to enter the increasingly crowded field with their announcement of a $1.5bn initial partnership with major Dutch investors APG Asset Management and Bouwinvest.

The venture has two sites under due diligence where it will construct its first towers. But their approach will likely see the group move much faster than offshore operators that made initial inroads in the sector, and even the local developers that are now launching their first sites.

With big developers Mirvac, Lendlease and Stockland getting into the area, as well as the major international operators building and managing sites, the field appears crowded, even though it makes up a small proportion of housing overall.

Scape Australia principals Stephen Gaitanos, left, and Craig Carracher.

Mr Carracher said success in the “aggressively competitive” sector would require scale and efficiency.

“Without 1500 units in a city precinct it will be hard for any operator to deliver the technology, safety and security solutions, facilities management support and consumer tenant needs,” he said.

He pointed to Scape’s existing network across four capital cities, backed by property, building and technology management and its in-house facilities management.

“Our ability to deliver scalable solutions immediately will change the landscape in the rent to live sector,” he said. “We will disrupt in this living sector as we did the student living sector.”

Mr Carracher said several global players had been in Australia for years with a mandate to develop and operate build-to-rent and had been slow to execute.

“Foreign capital that thinks it can deliver operational excellence without local scale will continue to struggle,” he said. “There are no major operators with a pure rental DNA.”

The Scape chairman argued that purpose-built rental accommodation operated differently from build-to-sell, and must deliver an improved product to customers, which could challenge traditional property groups.

“It’s not apparent that the larger office and commercial real estate groups in Australia have proven their ability to execute a rental-oriented product. But the market is huge, the margins are low and the focused operators with scale should succeed and support the much needed diversity in Australian housing product,” he said.

A student unit is seen at the Scape international student housing accommodation in Redfern, Sydney. Picture: NCA NewsWire/Bianca De Marchi

The venture will focus on developing a portfolio of multi-family assets. It is looking to capitalise on Australia’s strong urban population growth and to address the undersupply of apartments, which, combined with strong rental demand, has created affordability problems.

The build-to-rent sector has seen a surge in both the number of operators getting into the market and in new projects.

The complexes could play a crucial role in helping to alleviate the country’s rental crisis, by providing more supply at a time when traditional build-to-sell developers have been hampered by higher rates, soaring building costs and still weak pre-sales.

The new venture will focus on developing urban, transport-oriented rent-to-live assets and operate under a new brand, and is billed as offering backers access to branded, low-risk, resilient cash flow that have made the area a favoured asset class globally.

The yet-to-named venture hopes to create more affordable options for renters in Australia, giving them the opportunity to live in neighbourhoods they want to live at rents they can afford in locations with convenience and amenity. The apartments will also aim to be highly energy-efficient.

The renewed push into build-to-rent comes after the Albanese government brought in incentives to encourage investment in the sector, including halving the withholding tax rate imposed on foreign investors in managed investment trusts to 15 per cent.

APG head of Asia Pacific real estate Graeme Torre said the rented sector was “fully aligned” with one of the building blocks of its strategy: “urbanisation, where among other things, we look to address important issues such as housing affordability”.

Bouwinvest director Asia-Pacific Investments Robert Koot said the company had expertise in the affordable housing segment in the Netherlands, US, Germany, Japan and many other countries. “Via this new joint venture we are now broadening the exposure of our clients and further diversifying their allocation in Australia,” he said.

Originally published as Scape aims high with build-to-rent empire of 10,000 apartments