Daiwa, Lendlease strike BTR deal

Lendlease won a tender to deliver build to rent units at Queen Victoria Market.

Daiwa House will enter the Australian market via a joint venture with Lendlease for a $650 million Docklands build to rent project.

Mirvac’s Liv Aston (centre), under construction at 7-23 Spencer Street.

The 98 year old Osaka based giant – Japan’s largest home builder – will own three quarters of the proposed 45 level tower with 797 dwellings at 646-666 Flinders Street (artist’s impression top), part of the $3 billion mixed-use Melbourne Quarter development.

Lendlease will retain the balance and act as investment manager.

Lendlease sold 699 Collins Street for $1.2 billion in 2021.

It is also responsible for construction.

The tower will stand within cooee of Liv, a 32 level, 492 unit BTR project Mirvac is completing as part of its redevelopment of the ex-Melbourne Convention & Exhibition Centre site, at the south west corner of Flinders and Spencer streets.

Lendlease and Daiwa House’s Claremont Hall in Manhattan.

Coincidentally, Mirvac sold another Japanese real estate group, Daibiru, a half share in a $660m office under construction as part of that project.

Three weeks ago, meanwhile, the City of Melbourne appointed Lendlease to co-deliver a $1.7b mixed use project on the 3.2ha Queen Victoria Market car park.

Dubbed Gurrowa Place, and due for completion in 2028, it will include a park, Market Square, to replace a part of the block which was between 1837-1922 the Old Melbourne Cemetery.

Around it will be three skyscrapers – one, rising 46 storeys, to include 560 apartments – the bulk (476) BTR, and another, at 49 levels, to be a 1100-bed student accommodation complex owned and run by Scape.

The third tower would be a 28 floor, 43,000 square metre office.

Lendlease and Daiwa House also recently completed a BTR asset, Claremont Hall, in Manhattan.

Another offshore group enters Australian BTR

Daiwa House enters the Melbourne BTR market at a time residential vacancy is at record lows.

Upcoming supply is also tight – for a variety of factors including high building costs and low demand from prospective off-the-plan buyers.

Recent legislation changes – argued to throw more rights to renters, particularly in regard to being able to modify properties, sublet and retain pets even if the landlord objects – have also spooked a chunk of investors out of the market, agents have reported for the past 24 months.

Last November, US-based property giant Hines teamed with Cadillac Fairview, the real estate investment arm of the Ontario Teachers’ Pension Fund, to deliver three BTR projects here, in Brunswick, North Melbourne and South Melbourne (story continues below).

Hines and Cadillac Fairview’s Macaulay Road, North Melboure, BTR proposal.

Greystar meanwhile, which US based too, is completing three BTR towers in Fishermans Bend, late last year snapped up two more local sites for this kind of product – at Fitzroy and North Melbourne.

A sky park designed as part of the $2.9 billion Melbourne Quarter.

Also forming partnership to deliver this kind of asset in coming years is Sentinel Fund Manager Australia, an arm of US-based Sentinel Real Estate, which last October teamed with Dutch pension fund PGGM, to own a c$1.5b portfolio.

A recently permitted build to rent tower at 194 Lorimer Street.

Canada’s BentallGreenOak and Partners Group is also investing in Australian BTR, last February forming a venture with Brisbane’s GreenFort Capital for a South Brisbane project with c380 dwellings.

“We are committed to broadening our development footprint in Australia and welcome the opportunity to further expand our global relationship with Lendlease to deliver to the Melbourne community this quality BTR opportunity,” Daiwa House chief executive officer, Koji Morishige, said.

“Housing affordability is front of mind for Daiwa House and this BTR opportunity is reflective of our commitment to assist with increasing the supply of quality and well positioned rental accommodation for the residents of Melbourne,” he added.

Melbourne Quarter nears completion

Lendlease and Daiwa House’s Melbourne Quarter asset will be all-electric, with studio, one, two and three bedroom dwellings and resident-only perks including a 25 metre lap pool, bowling alley, karaoke and music studio, virtual sports and games room, cinema, gym and spa, sauna and steam room.

It will also include a co-work office component and concierge.

Construction is set to start next month with residents to move in from early 2026.

“Daiwa House’s investment in our BTR project in Melbourne further strengthens the relationship between our two organisations as we bring the best of our shared global expertise to this development opportunity,” Lendlease chief executive officer, Dale Connor, said.

“This announcement highlights continuing demand from our Japanese partners for high quality opportunities across our global project pipeline – in total, we’ve now secured Japanese investment in projects totaling approximately $11b in end development,” he added.

Diagonally adjacent to Southern Cross station, bound by Collins and Flinders streets and Wurundjeri Way, or the Docklands Highway, Melbourne Quarter also includes offices – part of which Lendlease occupies as its headquarters – and an elevated park.

The BTR project will be the last piece of the development – it could accommodate over 1500 of the c3800 residents expected to call the precinct home.

Some 14,000 workers are expected to be based there too including within a 34 level, 70,000 sqm office under construction, part set to be Medibank’s headquarters – an asset Lendlease sold to the National Pension Service of Korea for $1.2b on a funds through basis in mid-2021.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of realestatesource.com.au.