Mirvac Group is buying a controversial proposed Melbourne apartment tower from PDG Corporation – provided it can substantially up the density.
The listed property giant is paying $333.5 million for a yet to be constructed 38-storey complex at the Queen Victoria Market, which it hopes to configure with 490 Build to Rent apartments.
PDG would develop the asset which Mirvac is acquiring on a fund-through basis.
Mirvac’s build-to-rent scheme would replace a permitted plan to construct 320 standard apartments intended by PDG to have been offered to the public and sold down individually.
The residences formed part of a $450 million development which also includes a hotel and public space. The Queen Victoria Market itself is undergoing a $250 million refurbishment to modernise retail and warehouse areas.
PDG started construction on non-residential elements of the Munro site in January. Last month, it secured Veriu to operate the inn.
Mirvac announced today that the agreement with PDG is subject to conditions, including planning and redesign, “which will ensure the building delivers purpose-built, BTR product”. Mirvac intends to retain the asset upon completion.
The dwellings are earmarked for part of a 6500 square metre block at the south-east corner of Queen and Therry streets, which the City of Melbourne acquired for $76 million in 2014, as part of plans to rejuvenate and extend the neighbouring market
Vendor the Munro family, which held the site since 1910, rejected higher offers so as to sell it to the council for its idea.
City of Melbourne later engaged PDG, from the private sector, to develop part of the parcel with community facilities worth $90 million, including a 120-place childcare centre, gallery and theatre, as well as revenue-raising hospitality and retail areas.
Some 2500 sqm of open space and 500 underground car parks, specifically for market customers, formed part of the master-plan.
In exchange for constructing the commercial and public elements, PDG was controversially offered part of the Munro site to develop privately with a major skyscraper.
Last May, PDG won approval to construct two buildings, rising 10 and 38 storeys, and containing an 80-suite hotel and the 320 apartments – 56 of which had to be allocated as affordable housing.
It is this residential component of the permit which Mirvac and PDG now seek to replace with something higher density (ie, the developers would redesign the approved 38-storey structure to fit 490 flats).
Mirvac made reference to the Munro development at an investor presentation released to the market last week.
Last year, it set up a club to fund BTR projects, securing Clean Energy Finance Corporation as an investor. Last week Mirvac raised equity of $750 million to repay debt and invest in projects such as the Munro complex.
Major developers including Salta Properties and Grocon are proposing this kind of product elsewhere in inner-Melbourne.
“Renting has become a lifestyle choice for a much wider group of people who want to be closer to work, and other lifestyle amenities. We believe BTR can revolutionise the rental experience with improved choice, quality and security of tenure,” Mirvac chief executive officer and managing director Susan Lloyd Hurwitz said
“BTR is one of the largest real estate asset classes in the world and entering into this asset class makes good business sense for Mirvac,” Ms Hurwitz added, “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 BTR sector in Australia, for which we see enormous potential over time”.
Mirvac is also developing this stock within its Indigo Pavilions project at Sydney’s Olympic Park, due for completion in 2021.