Cedar Pacific taps investors for new $500m build-to-rent fund

Cedar Pacific taps investors for new $500m build-to-rent fund

Render of Cedar Pacific's 475-unit build-to-rent tower in Brisbane (Provided)

Fund manager Cedar Pacific has launched a $500 million raise for its very first build-to-rent (BTR) fund, which will be seeded by developments in Brisbane and Auckland, New Zealand before targeting other Australian capital cities.

Established in 2015 by Luxembourg-based Pamoja Capital, Cedar Pacific manages a $2.5 billion portfolio of more than 10,000 beds across 18 assets in Australia and New Zealand, with an additional four assets in development.

Cedar Pacific has appointed Savills Capital Advisors to manage the $500 million equity raise for the new fund, which will be seeded with two developments - a 39-storey tower with 358 new apartments in Auckland and a 32-storey tower located in Brisbane.

The project in Queensland is set to emerge as the state government’s third pilot build-to-rent project, featuring 475 apartments of which more than half will be eligible for government-subsidised rent. 

Essence Communities, a subsidiary of UniLodge, will operate the completed BTR projects under a white-label agreement.

“Affordable and professionally managed housing is key to a growing population, fuelled by Millennials, older Gen Zs and the return of higher immigration numbers,” Cedar Pacific CEO Bernard Armstrong said.

“We are passionate about creating positive investment opportunities with responsible social and environmental factors.  The recent reform of MIT will go far to encourage investment into the growth of a sector that can respond to our housing shortage.”

The launch of the fund comes after the government announced the managed investment trust withholding tax rate for residential BTR developments will be halved from 30 per cent to 15 per cent for foreign investors in jurisdictions like Singapore, Canada and Japan.

The changes, which will apply from 1 July 2024, are for projects consisting of 50 or more apartments being made available for rent to the general public. The dwellings must also be retained under single ownership for at least 10 years before they can be sold.

Other companies tapping into Australia’s BTR market include multinational Greystar Real Estate Partners, which is behind a $500 million project in South Melbourne that is set to become one of the nation’s largest BTR developments. The global real estate group has even more BTR projects in the pipeline after acquiring 155 Johnston Street, Fitzroy for an undisclosed sum seven months ago.

Meanwhile, Sydney-based developer Mirvac has more than $1 billion BTR developments under construction, with the completion of 490 apartments at LIV Munro in Melbourne's Queen Victoria Market (QVM) precinct underway.

Other players entering the space include Cadillac Fairview, Sentinel Real Estate Corporation, rich-lister Tim Gurner and super fund HESTA.

Cedar Pacific’s new BTR vehicle has a further nine assets totalling 3,500 units in its pipeline, including four with development approval. The fund manager plans to target assets in capital cities like Sydney, Melbourne, Canberra and Perth.

“The build to rent sector, whilst relatively new in Australia and New Zealand, is firmly established in UK and Europe,” Savills Capital Advisors Co-Head Joe Guilfoyle said.

“Due to similarities between these markets, we anticipate strong interest from institutional investors both in Australia but also internationally. 

“We anticipate attractive risk-adjusted returns in the BTR sector in Australasia due to forecast rental growth as the market matures over the next few years.” 

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