MEDIA RELEASE: Qualitas and GURNER™ announce major entry into multifamily housing sector

3 December 2020

Australian Real Estate Fund Manager Qualitas and multi-billion-dollar developer GURNER™ have announced a partnership to enter the multi-family housing sector and the imminent launch of capital raising for a dedicated Fund for the sector. The Fund will boast an initial pipeline of three seed projects with total value of over $1bn, in prime inner Melbourne locations with construction commencing in Q1 2021 for the first investment.

With the partnership covering the eastern seaboard of Australia and New Zealand, GURNER™ and Qualitas aim to become one of Australia’s largest multi-family housing players in the next 12 – 24 months with the platform focused on the deepest part of the Australian rental sector, being product rented by professionals with a focus on amenity and service.

The partnership will allow Qualitas to launch a new multifamily fund vehicle to provide investors both domestically and internationally access to a portfolio of quality inner urban multifamily assets developed and operated by GURNER™.

The joint venture sees both groups focusing on their core skills-sets with GURNER™ as developer responsible for design, construction and project development, as well as appointed as the operator of completed assets, and Qualitas assuming the roles of fund manager and transaction structuring. Given the growth aspirations for the portfolio, both groups will source assets for the partnership.

The move comes just months after GURNER™ and Qualitas announced a $150 million equity partnership for traditional build-to-sell residential development.

This joint venture will expand that partnership with GURNER™ and Qualitas now actively seeking opportunities to grow the pipeline of both build-to-sell and multi-family housing projects.

Having closely monitored and analysed the sector over the past two years, GURNER™’s expansion into the multifamily housing sector comes at a time when the developer believes the asset class can sit alongside traditional build-to-sell residential development in Australia in terms of financial returns and add diversity to larger developers like GURNER™.

Qualitas has been active in the multifamily sector over recent times, having identified the opportunity in Australia in its nascent stage. Qualitas has invested in Multifamily in the US as well as launching Australia’s first dedicated Build-to-Rent debt fund to make loans to the sector backed by an Australian institutional investor.

The firm considers the local post-COVID-19 environment conducive to the growth of the multifamily sector and had been seeking a top-tier local development partner to work with to capitalise on the opportunity.

The Australian multifamily opportunity is considered overwhelmingly compelling having regard to the strong underlying demand fundamentals for quality product combined with low long-term interest rates and new government support for the sector coming via land tax discounts and other incentives. This backdrop is enhanced by the looming apartment supply shortage across Australia’s major capital cities.

With the three seed assets comprising over 1,100 units and the strong delivery capability of GURNER™, Qualitas’ new fund is primed to be one of Australia’s leading multi-family investment vehicles for both local and international investors to access the market.

Both GURNER™ and Qualitas say they are excited about the opportunities 2021 will bring, and confirmed they are in confidential discussions on a handful of other opportunities with Sydney and Brisbane being the key priority for expansion of the portfolio, which is anticipated to grow to over 2,000 units over the coming period.

Quotes from Qualitas global head of real estate and co-founder Mark Fischer:

“Qualitas is a highly experienced investor in high-density residential across Australia and we have invested offshore in Multifamily, so we have been seeking the most appropriate way to capture what we believe to be a significant Australian opportunity for our investors”.

“ Key for us was finding a partner who has an unrelenting focus on the experience of the end customer and can make that work operationally, but who also has a deep local track record of delivering apartments that the local consumer wants to live in. If we found that partner, when combined with our funds management and deep capital raising prowess, we felt we could deliver an unrivalled platform for our investors.”

“Now working With GURNER™, we feel the platform has a market-leading service offering all the way through the value-creation chain, from our end-customer tenants to our end customer institutional investors and everything in between”

“The multifamily sector in Australia is compelling on a risk-adjusted returns basis and the Qualitas team working with GURNER™,  gives a unique ability to secure key sites in trophy locations through intelligent and thoughtful deal structuring.”

“The opportunity for entrepreneurial private players such as this platform to capture upside as the Multifamily sector matures over the coming years is significant, and as it catches up to its global peers we expect our investors will be rewarded over the medium to long-term.”

“As a manager we like to focus on opportunities that present 3 key things: firstly, there must be compelling underlying real estate fundamentals, which Multifamily in Australia clearly presents, secondly it must be a scalable opportunity and finally we must have a reason to exist in the space – it must be an opportunity where we can bring our skillsets together with our operating partners to create a compelling proposition in the market.”

“We estimate that in 2023, only 9,500 apartments will be delivered across Melbourne, Sydney and Brisbane. This is a drop of around 80% compared to the past five years, when an average of 48,000 apartments were delivered per year in these three cities.”

“While rental demand is softer in the immediate term on the back of COVID-induced lower net migration, there are structural demand-side strengths that can’t be ignored.

“Young, well-educated professionals are persistently prioritising lifestyle over home ownership, preferring comfortable, sustainable, well-located rentals over ownership. And once the immigration tap is turned back on, net overseas migration is forecast to rebound to 200,000 per year by 2024.”

“This combination of drivers makes this a compelling opportunity and we are excited to launch this Fund”.

View the full IPE Real Asset article here.

View the full Australian Financial Review article here.