Blackstone Eyes Aussie Build-to-Rent Expansion

US investment powerhouse Blackstone is weeks away from welcoming tenants to its second build-to-rent play in Australia and is already planning to expand its foothold in the burgeoning sector.

Completion of its 437 build-to-rent apartments as part of the $1.2-billion Caulfield Village development in Melbourne’s south-east is due in November.

Earlier this year, a consortium led by Beck Property Group—engaged as developer under a fund-through deal with Blackstone—took the construction of the project in-house following the collapse of head contractor Probuild.

The build-to-rent apartments sit above the completed Caulfield Village shopping precinct and are part of one of Melbourne’s largest infill developments.

The Caulfield Village development lies between the suburb’s railway station and its famed racetrack on 5ha of vacant land, which was formerly the Caulfield Racing Club’s members’ carpark.

Blackstone was an early mover in Australia’s burgeoning build-to-rent sector but has only recently officially launched its dedicated platform, Realm Australia.

“We will continue to seek compelling opportunities to invest in the sector in Australia,” Blackstone real estate principal Tom McDonald said.

“There’s a growing demand for rented residential properties, which spans across multiple generations.

“It’s important to have a range of housing types, tenures and price points in the right locations and across the housing continuum.

“The beauty of our business model is that we have incredible scale and capital to deploy.

“In housing, we have invested more than US$4.1 billion globally to maintain and improve our residential properties to the highest standard.”

McDonald said Blackstone was “a big believer in Australia”.

▲ Blackstone sees growing demand for rented residential properties, and it plans to continue to seek compelling opportunities to invest in the sector in Australia.

“We have built a strong presence [in Australia] over the last 12 years,” he said.

“We have built robust portfolios in our high conviction sectors including rental housing, hospitality, and logistics.

“Australia is a sophisticated financial market that has seen consistent economic growth over the years.

“This growth is supported by government efforts to create a business-friendly regulatory environment, world-class infrastructure and a talented workforce in a diversity of competitive industries.

“We look at fast-growing cities in Australia such as Melbourne and Brisbane, which are innovative cities that continue to attract investments and jobs in key industries such as financial services and transport.”

But McDonald said Blackstone’s current priority was on “preparing to welcome tenants to our second project, Realm Caulfield, in November”.

“Our first project, Realm Kangaroo Point in Brisbane, is fully leased 12 months since opening, and we expect Realm Caulfield to face similar demand,” he said.

Last year, Blackstone snapped up the 21-storey Lotus Tower in Brisbane’s inner-city Kangaroo Point from Chinese-backed R&F Property Group for about $100 million.

The 200-apartment tower—near the city’s landmark Kangaroo Point cliffs and with CBD and river views—had sat empty since its completion in late-2019.

Blackstone has subsequently converted the property to a build-to-rent asset under its Realm Australia platform. It opened its doors to tenants in September last year and is now fully leased with about 300 residents across a mix of one, two and three-bedroom apartments.

The first generation of build-to-rent projects in Australia has been backed by overseas institutional capital.

At last count, the fledgling sector comprised 60 projects totalling 22,254 apartments with an estimated value of $13.6 billion.

Only 6 per cent of these projects were operating, 11 per cent were under construction and 83 per cent were still in the planning stages. The lion’s share of the projects is in Victoria (37) followed by New South Wales (11), Queensland (8) and Western Australia (4).

According to Ernst & Young forecasts, over the next decade or so the sector has the potential to rapidly grow to account for 10 per cent of the nation’s rental pool—the equivalent of 375 projects totalling 350,000 apartments worth an estimated $320 billion.