Prominent joint venture partners MaxCap Group and Troon Group have secured a $400m development pipeline in Melbourne’s inner south-eastern suburbs. The joint venture partners have confirmed the acquisition of a substantial parcel of existing industrial properties in Cheltenham as well as securing planning approval for a new industrial estate at their site in Clayton South.

The newly acquired Cheltenham properties, offering extensive frontage to Bay Road and Wangara Road, represent a sizeable holding of 5.5 hectares of commercial 2 zoned land with strong existing income across triple net leases and staggered lease profiles. The joint venture partners intend to carve the site up and progressively redevelop it to maximise the opportunity.

Simon Hulett, Head of Direct Investment at MaxCap, confirmed the Cheltenham site had been purchased in an equity joint venture with Troon Group.

“This is a significant acquisition that we are very proud to have executed on with the Troon Group team – our fifth joint venture together. The large landholding, flexible zoning and established location lend the site to higher and better uses via retail, childcare, warehousing, and self storage. Leaning into the complexity of the underwriting strategy is where we have been able to unlock value. The ability to de-risk various future uses combined with demonstrable value on the buy attracted strong investor demand,” said Hulett.

“It is ideally located close to the proposed new Suburban Rail Loop station, proximity to major road infrastructure, Westfield Southland Shopping Centre and some of Melbourne’s most established residential suburbs like Brighton and Sandringham. We see tremendous scope to create value on the site and we expect the redevelopment to deliver around $200m of product into the precinct,” Hulett added.
The Victorian State Government has identified Cheltenham as a critical hub for both future population and economic growth as demonstrated by the $35b Suburban Rail Loop project being anchored by a new station and surrounding development in the Bay Road precinct.

Additionally, the joint venture partners confirmed that their nearby Clayton Industrial Business Park development had just received planning approval from the City of Kingston last week.

Tom McInerney, Managing Director of Troon Group said, “We were thrilled with the speed with which we were able to secure the permit and appreciate the efforts of the State Government and local council in supporting the application. This will allow us to execute on our strategy of creating a brand new 60,000sqm prime-grade industrial estate across nine warehouses to provide much needed new supply into the highly constrained South-East industrial and logistics market. We expect to commence construction in Q4 2024 with anticipated completion in late 2026.”

The Cheltenham sale was brokered by David Aiello from CBRE and Daniel Telling from Colliers.

MaxCap Group, one of Australia’s leading commercial real estate investment Managers, today announced two new appointments to its Capital team. These latest appointments are part of a significant team build out since Rob Hattersley joined MaxCap as Group Head of Capital 12 months ago.

Penny Tao, CFA, has joined as Director, Private Capital with a focus on capital raising strategies across the Asian investor community including ultra high net worth, inter-generational family wealth, and distribution networks. Penny joins MaxCap from HSBC where she has had 19-year career working across Australia, China, Hong Kong and the UK in a variety of retail banking, wealth management and private banking roles. She reports to Ben Klein, Head of Private Capital and is based in Melbourne.

Rory Hain is joining on 8 November as Associate, Capital – Institutional Mandates. He will be responsible for investor servicing of MaxCap’s key institutional investor clients who are made up of some of the largest global institutions. He joins MaxCap from Westpac Commercial Bank in Brisbane, where he spent three years most recently as a relationship manager in their property division. Before this, Rory held civil engineering roles for five years with United Finance Group, Acciona and FKG Group. He will report to Domenic Demaria, Associate Director Capital – Institutional Mandates and will be based in Melbourne.

Commenting on the latest hires Rob said “We are thrilled to have Penny and Rory join our team. Their combined calibre and experience will bolster our existing team and round out our coverage of domestic based Asian clients and institutional investors.”

“It is a significant period for our industry and sector which is uniquely positioned to provide appealing risk-adjusted returns to an expanding investor audience both domestically in Australia and on the global stage.”

Initial seed asset – $108m student tower development in Perth CBD

Real estate investment manager MaxCap Group, mutual wellbeing company Australian Unity, and leading operator UniLodge have formed a long-term partnership to develop $1 billion of new purpose-built student accommodation (PBSA) assets across Australia. The social infrastructure strategy is focused on meeting the increasing demand for high quality student accommodation facilities servicing the 1.8 million students enrolled at Australian universities.

The initial seed asset in the planned portfolio is the development of a 732-bed tower at 319-335 Wellington St, a few hundred metres from the new 60,000sqm Edith Cowan University city campus development (ECU City) in the Perth CBD, Western Australia. The cost of construction for the 30-storey student tower is circa. $108 million and is due to commence operating in line with the opening of the new ECU campus in Semester 1, 2026.

Perth-based urban renewal specialist, Sirona Urban, has been appointed as joint development manager (alongside Australian Unity). Built has been appointed the project’s construction partner and is currently undertaking pre-construction works. The asset will be operated by UniLodge once complete.

MaxCap Group’s Head of Direct Investment Simon Hulett said student accommodation was booming as a global sector.

“Education in Australia is the leading non-resource sector asset class and international student numbers are growing rapidly,” Mr Hulett said.
“Currently, 25 per cent of enrolments are international and are seeking quality housing given the dearth of on-campus stock, which represents only about five per cent of supply.”
“Student accommodation is a well-established and sophisticated asset class in Australia that generates strong income profiles. PBSA product has matured in the post-pandemic environment providing a high-quality offering that is thoughtfully curated through the provision of extensive amenity and services.”

“We are privileged to be able to partner with groups of the quality of Australian Unity and UniLodge to execute a scalable long-term social infrastructure strategy in Australia’s supply-starved housing sector,” he said.

Australian Unity has an extensive track record delivering and managing social infrastructure assets while UniLodge is the largest operator of student accommodation beds in the country currently managing around 38,000 beds.

Australian Unity Social Infrastructure Executive General Manager Ryan Banting said he was delighted to be partnering with MaxCap and Sirona Urban, and to extend their existing relationship with UniLodge.

“We partnered with UniLodge in 2021 to create the 695-bed Lady Lamington student accommodation buildings at Herston Quarter in inner Brisbane, as part of the broader Herston health and education precinct including University of Queensland and Royal Brisbane Hospital,” Mr Banting said.

“We plan to create a national portfolio of prime student accommodation assets across Australia. We are excited to make this Perth development a reality.

“Student accommodation is a compelling investment and a vital component of Australia’s social infrastructure mix that directly contributes to the growth of our economy and the wellbeing of our communities.

“This development advances Australian Unity’s participation in the sector, that also includes seniors living, specialist disability accommodation, childcare, and healthcare infrastructure.”

Australian Unity’s social infrastructure development pipeline currently totals ~$2.5 billion, which includes the ~$1.4 billion healthcare property pipeline and the remaining stages of the Herston Quarter redevelopment in Brisbane.

“The new student accommodation in Perth’s CBD will contribute to the precinct’s vibrancy and will help students unable to live close to their place to study because of severe rental accommodation shortages. In an environment where housing supply is falling well short of demand, students no longer decide on a course and figure out the living arrangements later—it is now a factor in which course they can take.
“Student accommodation has an increasingly important role to play in our cities and regions contributing new housing and adding to overall stock. Australia’s housing shortage has created real issues for domestic and international students in need of accommodation with recent data revealing that in Western Australia, in 2022-23 the number of student visas lodged was approximately two times higher than in 2018-19 and around 2.5 times higher than 2021-22”, Mr Banting said.

Based on Australian Unity’s estimate of full-time students and bed numbers in Perth, approximately 92 per cent of students are unable to access purpose-built student accommodation, highlighting a significant supply shortage compared to other Australian states. The West Australian residential rental market is also experiencing significant supply shortages, with a rental vacancy rate of 0.8 per cent and average weekly rents for houses and units increasing by approximately 17 per cent over the last 12 months to September 2023.^[1]

Peter Bates, Executive Chair of UniLodge said “this new purpose-built accommodation would be an important addition to UniLodge’s expanding Perth portfolio and will support its mission to help students make the most of their university years.

Perth is home to some of Australia’s finest universities, and, as a study destination is growing in attraction for both domestic and international students. We are therefore forecasting demand to be strong for Semester 1 2026 intake.”

Mr Hulett said he was optimistic about the possibility of growing the partnership between the groups.

“We are working with Australian Unity and UniLodge to curate a national pipeline, including potential sites in Sydney, Melbourne and Brisbane.

“The uniqueness of student accommodation is that it is largely geographically agnostic given the quality of Australia’s tertiary education institutions that underpin occupancy, so we intend to create a diversified portfolio of approx. 3,000 beds covering the major markets,” he said.

Tory Packer from Cygnet West negotiated the land acquisition and Planum Partners supported the capital raise with Australian Unity.

1. www.reiwa.com.au
2. Projected as at 30 September 2023

The mandate will target commercial offices, hotels and retail assets to decarbonise a substantial part of the property sector.

The CEFC investment will be managed by leading Australian commercial real estate investment manager, MaxCap Group. Under the mandate, MaxCap will originate, execute and manage a portfolio of real estate loans, aiming to attract further institutional capital to invest in the sustainable refurbishment of commercial buildings.

The mandate will provide senior debt finance for building owners seeking to improve sustainability performance of low rated commercial office, retail and hospitality assets through repositioning and upgrade works that reduce operational emissions by at least 30 per cent.

The first investment from the mandate paves the way for a greener Adelaide CBD, with a $35 million commitment to refurbish a 26-storey office tower at 30 Pirie Street. For this initial loan, MaxCap is co-investing $35 million via the MaxCap Investment Trust (MIT).

Building owner and asset developer Quintessential will target a 5 star NABERS Base Building Energy Rating with initiatives that include upgrading building management systems and controls, installation of solar panels and new energy monitoring systems, a comprehensive tuning program, and upgrades of lighting to LED.

CEFC Head of Property Michael Di Russo said: “It is essential that we make our commercial properties fit for a net zero emissions future in the race to decarbonise. Commercial buildings in urban centres, suburbs and regional towns across Australia account for around half of the nation’s building stock1 and many have never undergone energy efficiency upgrades.”

“Refurbishments like 30 Pirie Street in Adelaide’s CBD demonstrate to commercial property owners that relatively straightforward energy efficiency and renewable energy initiatives can deliver value for building owners and tenants alike and achieve broader scale change that can help meet ambitious sustainability goals across Australia’s commercial property sector. It’s great to be working with MaxCap to drive change and make our workplaces more sustainable as we work towards our national net zero goals.”

MaxCap Group Executive Chairman Wayne Lasky said: “We are delighted to be appointed as fund manager and to invest via our flagship Investment Trust with the CEFC who continue to demonstrate tremendous leadership as we strive for a net zero emissions future. We are also privileged to work with industry specialists such as Quintessential, who are highly regarded for their track record in regenerating commercial real estate assets.

“The longstanding MaxCap and Quintessential relationship means MaxCap can see the vision Quintessential has for the asset, and the opportunity to work with the CEFC aligns seamlessly with our ESG Strategy. A green strategy can achieve both sustainability and commercial outcomes for investors and MaxCap is committed to this strategy for the long term. We continue to seek additional institutional capital partners to invest in this strategy.”

Noah Warren, Head Assets at Quintessential said: “With a CAPEX budget of $30 million we will undertake significant works that will enliven and regenerate the building, bringing it back to prime A-grade standard in heart of the Adelaide CBD. The extensive refurbishments will considerably enhance the usability and enjoyability of the building for the current and future tenants.”

Outlining the impending boost to the building’s energy and sustainability credentials, Mr Warren continued; “A number of energy efficiency measures will be implemented, and the asset is targeting to achieve a significant reduction in base building energy usage, which will be a massive boost to the ESG offering of the building.”

Renovating existing building stock has been recognised as a key priority for achieving decarbonisation targets, with the International Energy Agency noting that retrofitting 20 per cent of existing building stock by 2030 to net zero levels will require an annual deep renovation rate of over 2 per cent from now to 2030 and beyond.2

The built environment is a major consumer of energy, with buildings accounting for around half of Australia’s electricity use.3 A 2021 CEFC investment in the refurbishment of a commercial office building at 200 Creek Street in Brisbane showcased how improving energy efficiency of existing buildings could drive down emissions and lift sustainability.

Research suggests that just 56 per cent of Australian offices have a current NABERS rating,4 leaving considerable scope for improvement in retrofitting and upgrading to reach net zero targets. Accounting for around half of Australia’s overall building stock5, many of the existing secondary commercial buildings throughout Australia, from urban centres to the suburbs and across regional towns, have never undergone energy efficiency upgrades, representing a significant opportunity for energy efficient improvements.

The CEFC has made more than $2.5 billion6 in lifetime commitments to improve energy efficiency and lift sustainability in Australia’s property through its investments across the industrial, commercial, residential sectors.

1 Ernst and Young, Mid-tier commercial office buildings in Australia – research into improving energy productivity.

2 IEA, Technology and Innovation Pathways for Zero-carbon ready buildings by 2030, 2022.

3 GBCA, Property Council of Australia, Every Building Counts, 2023.

4 JLL, The Race to Decarbonise Australian Cities, 2022.

5 Ernst and Young, Mid-tier commercial office buildings in Australia – research into improving energy productivity.

6 CEFC lifetime commitments to 30 June 2022.

The CEFC is an experienced specialist investor with a deep sense of purpose: we’re Australia’s ‘green bank’, investing in our transition to net zero emissions by 2050. With access to more than $30 billion from the Australian Government, we’re backing economy-wide decarbonisation, from renewable energy and natural capital to energy efficiency, alternative fuels and low carbon materials. In parallel, we’re focused on transforming our energy grid, backing sustainable housing and supporting the growth of our climate tech innovators. We collaborate with co-investors, industry and Government, recognising the urgency of the decarbonisation task. We also invest with commercial rigour, aiming to deliver a positive return across our portfolio.

MaxCap is a leading Australasian investment manager, specialising in commercial real estate. The company is exceptionally proud of its prudent risk management, delivering exceptional returns for domestic and global investors whilst maintaining a zero loss track record across more than 600 loans and $17.4 billion of investments since inception in 2007. MaxCap currently has over $7 billion funds under management and advice. MaxCap’s evergreen platform, the MaxCap Investment Trust (MIT) offers wholesale investors ongoing access to Australasian commercial real estate debt investment opportunities.

Quintessential specialises in property regeneration and development, providing tenants inspirational solutions and giving investors exceptional risk-mitigated returns. Founded in 2010 by Shane Quinn and Harry Rosenberg, it has acquired or sold over 20 properties of approximately 500,000 square meters (including 165,000 sqm of office assets nationally) delivering a 93% tenant retention rate and an aggregate 23% investor net IRR.