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Coronation buys mixed-use Merrylands site for $41 million

Written by Michael Bleby, Senior Reporter, Australian Financial Review

Coronation Property has bought a 12,418-square-metre site in Sydney’s Merrylands on which the developer plans to develop its first build-to-rent project, saying the market was increasingly accepting of such a housing type.

Privately owned Coronation, which has long eyed the new asset class, paid listed developer Stockland $41 million for the site with a permit for 562 apartments and 4500sq m of ground-floor retail and basement parking.

Coronation is negotiating to increase the size of development allowed on the site as a result of amended town planning controls for the Merrylands Town Centre in the western Sydney suburb.

It sees the site as the first in a portfolio of 5000 build-to-rent units it wants to develop over the next seven years. More than half of the Merrylands units will be BTR.

‘‘With buyers moving away from the ambition of housing ownership and increasingly into private  housing rental, there is an environment where build-to-rent makes more and more sense for property developers,’’ said director Les Landerer.

A tighter rental market also makes the asset class more viable, and recent indicators suggest this is happening.

Consultancy SQM Research said on Tuesday that rents rose in most capital cities in December even as vacancy rates gained, indicating an end in sight to the tenants’ market that has existed in cities such as Sydney since 2017.

Stockland sold the site, next to its Stockland Merrylands shopping centre and a block from Merrylands railway station, 3 1/2 years after announcing plans to develop the site in a move it said marked its return to apartment development.

Stockland chief executive Mark Steinert said his company sold the Merrylands site at a significant premium to book value and the company remained committed to a ‘‘disciplined’’ entry into the apartments market.

Other developers are also firming plans to enter the emerging asset class. Last month Mirvac announced two site acquisitions in Melbourne it intended to use for build-to-rent development.

Blackstone, one of the largest private equity firms in the world and which has an $11 billion portfolio in Australia, last month also said it was ‘‘well progressed’’ on its second build-to-rent project.

The project in Melbourne, with plans for 827 homes, is a similar size to its first project, a mixed-use development in Caulfield.

The above article was published in Australian Financial Review January 16, 2020.