It is all shaping up as very hip and schmick in Australia’s emerging build-to-rent sector.
But one of the new players to the investment asset class has an innovative institutional model that ventures where few others dare—social and affordable housing.
Melbourne-based developer Assemble’s build-to-rent model is heavily invested with the conviction of being a “solver for housing affordability”.
Meanwhile, the majority of the pipelines of other build-to-rent players are focused on a more premium product.
Assemble’s housing product is targeted at low- and moderate-income earners—with 20 per cent delivered at half the market rent and 30 per cent at 15 to 20 per cent below market rent.
And according to the company’s managing director Kris Daff, who was a speaker at The Urban Developer’s recent Build-to-Rent vSummit, the model does stack up.
“We’ve got 2800 apartments starting construction over the next six months,” he said. “And our target over the next decade is 20,000 dwellings nationally.
“It’s a scale business and about 18 months from now we’ll be operationally cashflow neutral. Then we can start to deliver returns for our investors and paying back some of the venture capital that has gone into the platform.”
Key to Assemble’s model is the institutional support from domestic superannuation investors, particularly the Australian industry funds, with a focus on the returns underwritten by the social impact and value of its projects.
The nation’s largest superannuation fund, Australian Super, holds a 25 per cent stake in the build-to-rent company.
“Our investors have got a responsibility to their members to deliver a better retirement and generate better investment returns for them,” he said. “But fairly-priced, income-appropriate housing that may assist their members is also a focus for them as well.”
Daff said superannuation funds were attracted to “highly predictable, stable, indexed cashflows over time” and some of the company’s project investors are taking significantly long-term outlooks with 60-year holds on the assets.
He said Assemble borrows its financial structure from US build-to-rent models but its community offer, neighbourhood and placemaking is based on housing co-operatives in Europe.
Given the taxation challenges surrounding the establishment and future growth of build-to-rent in Australia, the company’s innovative approach has paid dividends.
“Partnering with the community housing sector brings taxation concessions to our schemes,” Daff said.