Australia: Investment manager PGIM Real Estate plans to create a $750million coliving portfolio.
Two PGIM-run Asia-Pacific funds are backing a co-living venture in partnership with Point Capital, a real estate investment platform that specialises in modular construction. Point Capital was created by Tribe Hotels founders Mark and Melissa Peters and Lucas Salagaras, a former investment banker. Accor took a majority stake in Tribe in 2019.
The venture has secured seed assets in Brisbane’s Fortitude Valley and in Sydney’s Parramatta. Each of the first two schemes will comprise around 300 apartments. The plan is to grow a portfolio of between 1250 and 1500 apartments.
PGIM Real Estate’s managing director and head of Australia, Steve Bulloch, said: “The reason this stacks up financially for us is that we’re doing smaller and more apartments per floor that, we think, will work in those markets. So, it’s affordable and high quality. And because of the modular process, we’re building it a bit cheaper and quicker. We’ve very carefully selected this as our entry point because we think this works for us. It’s easy to talk about the fact that there’s all these tailwinds in terms of demand and supply. They are very attractive tailwinds in terms of rent growth. “We’ve struggled to get the returns in the more traditional BTR model to stack up for us. I’d say partly that’s because we’re also foreign. It’s a bit trickier for a foreigner with the tax overlays.”
PGIM is targeting an average net yield on cost of 6.5 per cent from the seed assets. The Australian government has pledged to halve to 15 per cent the withholding tax rate applied to foreign investors in managed investment trusts that hold rental housing, bringing it in line with other commercial property investments, but that cut is yet to be enacted.
“The proposal is positive. And quite frankly, we’re expecting that to be a benefit and to come through. Obviously, it’s frustrating, I think for everyone at the moment, that the details are not clear. I’d certainly encourage the government to provide the next layer lower level of detail as to how this works,” said Bulloch.
PGIM is the global asset management business of New York-listed Prudential Financial, which has $US1.27 trillion ($2 trillion) in funds under management. In Australia, PGIM has around $3 billion in equity and debt mandates, across logistics, office, retail, hotels, data centres and mixed use. It also has some exposure to a variety of housing forms, from build to sell, land lease communities, student housing and seniors living.
