Diversified property group Mirvac will transform a key site next to the historic Queen Victoria Market into Melbourne's first build-to-rent complex after securing a deal with private developer PDG Corporation.
ASX-listed Mirvac has moved quickly to invest the proceeds of last week's $750 million equity raising, backed by investment banks JPMorgan, UBS and Macquarie Capital, to acquire 490 completed build-to-rent units for $333.5 million.
Funds were raised to support a diverse pipeline of development opportunities in commercial, industrial, residential and mixed-use projects, with a potential end value of $6 billion.
The Melbourne build-to-rent project will be part of the $450 million Munro development that will sit alongside the $250 million Queen Victoria Market precinct renewal in the city's CBD.
Colliers International's Oliver Hay and John Marasco helped to broker the deal, structured on a fund-through basis.
The project will be Mirvac's second of its type in the fledgling sector, with Pavilions, its first build-to-rent initiative, at the Sydney Olympic Park due for completion late next year.
PDG will now develop the build-to-rent project in Therry Street as part of the final stage of the 6,500sq m precinct, which it will begin later this year, as well as building a hotel and shopping areas.
The first stage, under construction, includes a community hub, public parking, affordable housing and childcare.
PDG has also since gained approval for a project, QVM Residences, comprising a 320-apartment residential tower which will include an 80-room hotel.
“Build-to-rent is one of the largest real estate asset classes in the world and entering into this asset class makes good business sense for Mirvac,” Lloyd-Hurwitz said.
“It will deliver a secure and valuable revenue stream, as well as presenting us with a new and growing customer base.”
“We are excited to drive the establishment of the build-to-rent sector in Australia, for which we see enormous potential over time.”
While residential "build-to-sell" development is slowing as the flow of capital is directed toward commercial development, the demand for residential property and places to live remains strong.
The build-to-rent typology will potentially create an opportunity for countercyclical investment in residential property to continue to deal with this demand while offering a more stable and secure rental environment than currently exists for tenants.
Mirvac last year set up an unlisted club for the build-to-rent sector and won substantial commitments, including a cornerstone investment from the Clean Energy Finance Corporation for a 30 per cent interest in the club.
Mirvac plans to grow the club over time partnering with investors interested in what could eventually become a $300 billion sector.
“We believe build-to-rent can revolutionise the rental experience with improved choice, quality and security of tenure,” Lloyd-Hurwitz said.