Cedar Pacific, backed by a Swiss investment group Pamoja Capital, has launched its first build-to-rent (BTR) fund in Australia, targetting a portfolio of at least A$1bn (€604.3m).
The Cedar Pacific fund is seeking to raise A$500m initially to develop a 32-storey tower in Brisbane offering 475 apartments and a 39-storey development in neighbouring country New Zealand with 358 apartments.
Bernie Armstrong, Cedar Pacific chief executive officer, told IPE Real Assets that some investors had already committed to the fund to enable it to kick-start the projects in Brisbane and Auckland. “We have some capital, and we would like to raise further capital to take advantage of the opportunities.”
He expected the initial raising to fund 1,500-2,000 apartments with an end value of more than A$1bn.
The fund would easily deploy the capital raised within 18 months, he said, noting that the group was holding a pipeline of BTR projects valued at around A$2bn. It has nine development sites with a potential to produce 3,500 apartments.
He said offshore investors were prepared to build assets because stabilised BTR were not yet available in Australia and in doing so they were able to generate higher returns.
“There is strong interest from Australian super funds, but they struggle with the development aspects,” Armstrong told IPE Real Assets. “They are just beginning to look at it. They had a big competitive advantage until two weeks ago.”
That was when the Australian government cut the withholding tax on BTR investments in Australia from 30% to 15%, effective from July. “This will make Australia more attractive to more offshore capital,” he said.
The BTR fund is Cedar Pacific’s fourth fund. It currently manages three student accommodation funds providing 10,000 beds in its A$2.5bn portfolio.
“BTR is a natural progression from student housing. Both asset classes are based around community living and designed for long-term investment,” he told IPE Real Assets.
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