Article | Intelligent Investment
Behind Salta Properties’ $3 billion Bet on Build to Rent
Why one of Australia’s largest privately owned property companies has put $3 billion towards the local build to rent sector.
June 17, 2024
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Salta Properties has grown to be one of Australia’s largest privately owned property companies with $4 billion worth of projects completed to date. Behind the big numbers is a family-run business with humble beginnings dating back to the 1970s – a single warehouse which has grown to become a major Victorian portfolio consisting of commercial, industrial and retail properties, alongside $5 billion of projects in the pipeline.
Headed by Salta’s Managing Director, Sam Tarascio, the company is now embarking on one of its most ambitious goals yet – the build to rent sector. With a pipeline of over 4,000 apartments in Melbourne, Salta’s new build to rent platform, Est., will aim to deliver premium rentals in Docklands and Richmond to join its maiden project in Fitzroy North, which is on track to welcome its first residents from July.
With core capabilities and dedicated specialists in Australia’s burgeoning build to rent sector, CBRE was keen to find out how Salta Properties identified strong investment opportunities in build to rent well before it began making local headlines. More importantly, as part of our Talking Property podcast, Tarascio answers whether there’s still more potential growth to come in this sector that’s been touted as a solution to the country’s housing shortage crisis.
“We could see though that Melbourne as a place to live was increasing in desirability and we just weren't producing enough housing. We've seen this happen now, but it was also mooted that Melbourne would become a bigger city than Sydney by population. Combined with the fact that our cost of occupancy, our rental costs, and our sale prices were - and still are significantly below that of Sydney - all played into our thinking.”
Tarascio says that the rental market has also traditionally been supported by small ‘mum and dad’ investors investing in property which has now become increasingly difficult. Regulations around tenant management, and the high cost of holding and maintaining property have essentially impacted the small investor's thesis around investing in residential property.
“It's become an asset class that's no longer really something that a cottage investor can invest in because there's just too many complexities. We could see that there was a need for an institutional play.”
Based on what Tarascio was seeing overseas in the established US and the UK multi-family (build to rent) sectors, Australia was naturally primed to follow suit. He also saw how smaller investors using smaller agents here were struggling to provide the right services that renters desired. To offset the issue of potential vacancy risks across Salta’s diversified portfolio of commercial properties, build to rent became a viable solution.
“As a long-term investor, it provides a stable income stream that offsets the peaks and troughs that you see in the commercial and industrial sectors. With the prime sites that we had, if you're doing build to sell, you would need to sell out of those sites. Instead, we felt these sites were really well-positioned to provide that institutional grade, rental proposition. It gives us the ability to hold those sites, provide a really good product, help solve the housing market issues and deliver a seamless rental experience to tenants.”
Headed by Salta’s Managing Director, Sam Tarascio, the company is now embarking on one of its most ambitious goals yet – the build to rent sector. With a pipeline of over 4,000 apartments in Melbourne, Salta’s new build to rent platform, Est., will aim to deliver premium rentals in Docklands and Richmond to join its maiden project in Fitzroy North, which is on track to welcome its first residents from July.
With core capabilities and dedicated specialists in Australia’s burgeoning build to rent sector, CBRE was keen to find out how Salta Properties identified strong investment opportunities in build to rent well before it began making local headlines. More importantly, as part of our Talking Property podcast, Tarascio answers whether there’s still more potential growth to come in this sector that’s been touted as a solution to the country’s housing shortage crisis.
Why build to rent makes sense
“Around five years ago, it was becoming fairly obvious to us that we were going to have a problem in the housing market,” says Tarascio.“We could see though that Melbourne as a place to live was increasing in desirability and we just weren't producing enough housing. We've seen this happen now, but it was also mooted that Melbourne would become a bigger city than Sydney by population. Combined with the fact that our cost of occupancy, our rental costs, and our sale prices were - and still are significantly below that of Sydney - all played into our thinking.”
Tarascio says that the rental market has also traditionally been supported by small ‘mum and dad’ investors investing in property which has now become increasingly difficult. Regulations around tenant management, and the high cost of holding and maintaining property have essentially impacted the small investor's thesis around investing in residential property.
“It's become an asset class that's no longer really something that a cottage investor can invest in because there's just too many complexities. We could see that there was a need for an institutional play.”
Based on what Tarascio was seeing overseas in the established US and the UK multi-family (build to rent) sectors, Australia was naturally primed to follow suit. He also saw how smaller investors using smaller agents here were struggling to provide the right services that renters desired. To offset the issue of potential vacancy risks across Salta’s diversified portfolio of commercial properties, build to rent became a viable solution.
“As a long-term investor, it provides a stable income stream that offsets the peaks and troughs that you see in the commercial and industrial sectors. With the prime sites that we had, if you're doing build to sell, you would need to sell out of those sites. Instead, we felt these sites were really well-positioned to provide that institutional grade, rental proposition. It gives us the ability to hold those sites, provide a really good product, help solve the housing market issues and deliver a seamless rental experience to tenants.”
What investors need to know about build to rent
- Build to rent is not a build to sell product being leased or rented out
There are clear distinctions in build to rent versus build to sell, from the design of the asset to how amenities are positioned, and the community is curated. There’s also differences in the ease of how to make applications, move in or out, and security of tenure. - Successful build to rent projects go beyond the property front
It also requires the whole management capability around it from how concierge services are provided to how support is provided to clients – not tenants. Projects must account for brand positioning, available resources and the training of staff, a concept similar to how hotels view hospitality. - Provide a real community for clients to thrive
There’s a requisite to foster a community in successful build to rent projects. Determine how the project’s amenities can be positioned to create interaction between clients living in those buildings and how they're designed to enhance the community experience. This is no longer just the lounge, cinema or gym in the back parts of the building. They need to be front-and-centre features aggregated together to create incidental opportunities for residents to come across each other, create relationships and build communities.
Listen to the full Talking Property podcast now to hear Sam Tarascio’s views on Australia’s housing supply issues, office sector and industrial & logistics sector performance.