First State Super is backing the potential of the build-to-rent sector, partnering with property giant Lendlease to set up a US$1 billion ($1.4 billion) investment platform to fund developments across the US.
The plan unveiled on Wednesday, with an initial US$500 million investment from both parties, is to create a US$2 billion portfolio of multifamily residential assets for rent in New York, Chicago, Boston, San Francisco and Los Angeles.
A developer such as Lendlease would normally build to sell but the build-to-rent market is growing.
First State Super head of income and real assets, Damien Webb, said the fund was enthusiastic about the “long-term fundamentals” of the market, which it has been mulling entering since September 2017.
“Over the last few years, First State Super has proactively researched the multifamily sector domestically and in the US,” Webb said in a statement.
Desire for the sector has been enhanced by a shift to renting. More than 6 million renter households have been created in the US over the last 10 years.
REST was an early mover in the build-to-rent market, inking a joint venture with US rental apartment developer Greystar Real Estate Partners.
In January, Lendlease and the Canada Pension Plan Investment Board (CPPIB) set up a build-to-rent investment partnership in the UK valued at £1.5 billion ($2.6 billion).
CPPIB said an initial investment of £450 million would be used to construct new homes for private rent at Lendlease’s £2.3 billion Elephant Park development within Elephant & Castle in London.
Lendlease will take charge of the platform’s development, construction and investment management.
The vehicle will be seeded with two existing Lendlease multifamily projects that are being completed in Chicago and Boston, with an end value of more than US$400 million.
Lendlease Americas chief executive Denis Hickey said the venture with First State Super was in line with the company’s approach.
“This new multifamily investment vehicle is consistent with our strategy of leveraging Lendlease’s integrated property capabilities to deliver high-quality urban regeneration projects that enhance people’s lives while simultaneously creating value for our shareholders and partners,” Hickey said.
The multifamily investment class is unique to the US and some markets in Europe; it comprises for-rent apartments in garden-style, medium- and high-density apartment buildings.
The Future Fund was one of the first Australian funds to invest in this asset class, through an arrangement with Berkshire Property Advisors.