MATTHEW RESZKA DIRECTOR RESHAPE DEVELOPMENT

Inspired by the accommodation and amenity offering of the mature BTR market in the US, Reshape Development director Mathew Reszka and his team were engaged to deliver the aspirational Realm Caulfield offering in Melbourne.

Matthew explains his ambitious approach to adapting the highly successful US BTR model into an Australian context, and why the idea of branded BTRs in Australia’s future rental market will ensure convenience, quality and security for a tenant demographic of young professionals.

ARM: Can explain what factors influenced Reshape Development’s vision for Realm Caulfield, and Australia’s BTR market more generally?

Matthew Reszka (MR): We started the idea of a BTR project at Caulfield Village, now Realm Caulfield, back in 2017. The vision for this project was quite strongly influenced by the opportunity we had to visit the US in early 2018, where we saw 30 operating new and or under development BTR assets. We noticed a varied range of BTR products; from the higher end offering to the middle entry, to the affordable product. This opportunity to see the mature assets class in the US helped us develop a vision and a brief for Realm

Caulfield. We were intent on trying to get Precinct Two North to work as a BTR asset, given the sheer volume and scale of the project which included an on-site supermarket on site. From a commercial point of view, it was always going to be a big project.

Given we were working with Blackstone, our vision was aimed at the middle to higher end of the market. That was the kind of aspirational asset Blackstone wanted to own. This also reflects its location in the blue ribbon suburb of Caulfield.

ARM: Location aside, what makes Realm Caulfield an aspirational BTR asset in the higher market end?

MR: We wanted to create an unparalleled living experience at Realm Caulfield. This is seen in things like its vast multi-functioning entry lobby which is similar to something you'd see in a five-star hotel. The lobby has a café internally, and the welcoming of a concierge as you make your way to your residence. One of the key objectives that we worked through with ARM was delivering on the idea that every resident could touch the concierge on their way to their apartment. We wanted people to be able to walk through the main entrance lobby, know they've arrived home, touch the concierge or manager, and then make their way internally through the building to their residence. This seamless navigational experience was really important for us to achieve across the six buildings because we wanted people to feel part of a cohesive community. With this in mind, it is ultimately the asset manager’s responsibility to create a sense of community in a BTR, and we identified this as one of the key differentiators in institutionally managed residential accommodation. At Realm Caulfield, the idea of community is further supported by the vast amounts of well-designed functional amenities available to residents. These include lounge areas, sports bars, dining areas, pools, large gyms, kids’ playrooms and dog runs. We saw all these kinds of amenities and more in the US, and it was our job to formulate them specifically for the Australian market.

ARM SUPPORTED US IN UNPACKING AND EXPANDING A BRIEF FOR REALM CAULFIELD. THEY CONSTANTLY CHALLENGED US TO ENSURE WE WERE DELIVERING SOMETHING THAT SUITED THE AUSTRALIAN MARKET BUT STILL REFLECTED THE LEARNINGS WE TOOK FROM BTR ASSETS IN THE U.S.

ARM: Beyond industry jargon, how do you think the public perceives the BTR market in Australia?

MR: I think that tenants are still in the process of discovering what BTR actually is. The sector is yet to create its identity in the public mainstream, outside of industry jargon. The general public doesn’t know what an institutionally owned residential asset looks like, and they don’t know what they’re going to experience when they walk through the door, and they find a manager who actually wants the tenant to rent the apartment and wants them to stay there long-term.

I think this will happen as more projects complete across the country, and people visit these projects and understand what the offer is. BTR projects will end up creating a brand for themselves, and people will understand the opportunity to live in this type of built community as opposed to renting from Mum and Dad, or buying their own Built to Sell apartment. The Australian BTR market is in its infancy, with only a handful of completed projects that are up and running.

In other rental markets you’re treated by the agent with suspicion, but in the BTR space, the first thing is to welcome people into the asset, and show them through the leasing path and the amenities. You’re the customer, and so the asset manager is going to go out of their way to win your loyalty.

ARM: Through your market research efforts, what is your knowledge of Australia’s target BTR tenant demographic?

MR: Most of the research that has been done in Australia, particularly across Melbourne and Sydney, shows that the target tenants are young professionals and millennials. This type of lifestyle and accommodation is going to appeal to them more than older generations. Given Realm Caulfield’s proximity to Monash University, we will also get some students in the mix there. Overall, the asset is aimed at a younger demographic of under 40.

Having said that, we’re also considering the maturity of the sector and how it will evolve in time to come. If you have the opportunity to grow up living in an institutionally owned and managed asset from a young age, there might be a point in time when you decide to raise your own family in that same environment. Maybe in ten years’ time, we may see assets that are specifically designed for couples and even older retirees.

ARM: How did the design and delivery process for Realm Caulfield unfold?

MR: The experience we had working with ARM on Precinct Two South allowed us to upskill ourselves into the BTR space, and ARM really came on the journey with us. Having worked successfully on the South development, we were confident about working with ARM to develop a brief for the BTR in the North precinct. Working with Neil Masterton and his team on the project was an outstanding experience. ARM supported us in unpacking and expanding a brief for Realm Caulfield, and they constantly challenged us to ensure we were delivering something that suited the Australian market, but still reflected the learnings we took from the US.

They were also able to expertly deliver on the architectural prowess of the project, while still responding to a budget. This can be extremely difficult to achieve in a BTR project. ARM devised clever and efficient ways to achieve an exceptional level of aesthetic value and detail in the project, which in turn ensured we met our budget.

ARM: What are some of the key learnings Reshape Development took from this project that your team would apply to future BTR projects?

MR: One of the challenges we had at Realm Caulfield is that we were trying to retro-fit the BTR into an existing masterplan. In hindsight, if you had a development site you were considering doing a BTR on from the outset, you might implement some initial objectives and visions in order to deliver the outcome more efficiently. This includes things like standardisation of unit types and more general design uniformity that is more cost efficient. The challenge with BTR developments is to achieve buildings that are aesthetically pleasing and don't have much variation between them.

It’s also important to remember that we’re not really renting these offerings on the apartments themselves, we’re renting them on the amenity and management layer. While they still have to be competitive in the market with resilient life cycle finishes, it's about achieving more uniformity and simplicity in construction.

ARM: Do you think the market will respond well to the idea of branded BTRs, or will people decide to live somewhere based on the address and location?

MR: We saw a lot of major branded BTR assets in the US. This offers people a seamless opportunity to relocate from state to state for work or changing life circumstances if needed. No matter where they live, they can rest assured that they will receive the same quality and level of amenity by being a customer of that particular brand.

We're a long way from that in Australia. However, if someone went to ‘Brand X’, that was an institutionally owned and managed asset, then they are going to receive that same service offering across all ‘Brand X’ properties, even if the scale of the site differs.

In Victoria at the moment there are nearly 20 BTRA assets under development. There will be a big crescendo of projects that all come at once, and the brands will be trying to differentiate themselves in the market. It will be interesting to see what offering they pitch to prospective tenants, and how they will pitch this offering.

I think as people come to understand the BTR sector in Australia, they will lean more towards living in an institutionally owned and managed asset because they realise it will offer a much more enriching and engaging experience.