Build-to-Rent (BTR): A Compelling Investment Proposition
Dislocation in real estate markets is providing a compelling opportunity for developers with the emergence of the nascent Build-to-Rent (BTR) sector in Australia.
Economic and macro challenges are creating uncertainty for real estate investors, disrupting the property industry, with a significant reduction in private residential investment over the past two years.
Built-to-Rent (BTR), also commonly referred to as Multifamily in the US, is defined as multi-unit residential developments that are designed and built as long-term rental housing under a single ownership entity. Unlocking this asset class enables the development of a new market in Australia and growth in much needed housing stock of various grades at scale. BTR provides a lower-risk investment opportunity that diversifies investor portfolios and provides income over a longer term.
To date, the Australian tax system provides no great incentive to this style of development, noting developers will not recover GST on construction and do not receive any additional tax incentives unless the product falls into the affordable housing category. There is, however, significant lobbying in the space, with a range of measures to ease cash flow on GST. It remains to be seen whether the government has the appetite to pursue these proposals.
There is currently a pipeline of over 6,000 units at different stages of development under a BTR delivery model. The current downturn in the residential market has contributed to a material increase in interest from global institutional investors who hold significant BTR exposure (namely across North American and European jurisdictions). According to CBRE figures, investor presentations have more than tripled year on year and the number of purpose-built institutional grade BTR projects under delivery has doubled.
Consequently, the advisory industry is gearing up for a wave of activity, with CBRE establishing a dedicated BTR advisory team in-country, providing know-how ranging from commercial and financial structuring to arranging equity and debt financing.
Andrew Clugston specialises in providing business advisory services for private businesses. His experience spans a range of sectors, but over the past decade he has become an expert in navigating the unique issues and regulations faced by privately-owned businesses in the property industry.
Andrew’s role is varied and in addition to attending to his clients Accounting and Taxation requirements also includes arranging capital, managing the banking relationship, establishing joint venture arrangements, and managing off-shore lenders and investors. He has been involved in high-profile projects in Melbourne from inception to completion.
The Global Financial Crisis (GFC) presented Andrew with an opportunity to become heavily involved in this dynamic sector, when developers sought additional expertise to secure finance. With its own set of commercial drivers, and alternative structuring and financing approaches, businesses in property and construction need a specialist who has a deep understanding of the industry in order to maximise opportunities. Today, Andrew relishes playing a role in an industry that forms a core part of the Victorian economy.
With a large number of off-shore clients, including a high proportion in Singapore and Malaysia, Andrew and his fellow colleagues foresaw the value in establishing a dedicated cross-border team to facilitate relationships across the region. The team services Asian clients in a manner that is sensitive to business and cultural differences, and focus on business development in various parts of the region.
Andrew is also a member of both the Pitcher Partners state and national Property industry groups and helps coordinate local and international initiatives that help clients stay informed of industry trends and opportunities.
Andrew joined Pitcher Partners Melbourne as a graduate in 2001. He worked across a number of different specialisations including Accounting and Audit, before homing in on his current area of expertise. He was admitted to the partnership in 2014.
Memberships and qualifications
• Bachelor of Business (Accountancy) (Swinbure University)
• Member of the Institute of Chartered Accountants Australia
• Asialink Business Leaders Course (University of Melbourne)
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