1 00:00:06,120 --> 00:00:08,000 Speaker 1: Welcome to the Fear and Greed Q and A where 2 00:00:08,000 --> 00:00:11,240 Speaker 1: we ask and answer questions about business, investing, economics, politics 3 00:00:11,240 --> 00:00:14,160 Speaker 1: and more. I'm Sean Aylmer. We talk plenty on this 4 00:00:14,240 --> 00:00:18,280 Speaker 1: podcast about housing, rising prices, first home buyers, the rental crisis, 5 00:00:18,400 --> 00:00:22,119 Speaker 1: lack of supply, but one part of the equation that 6 00:00:22,200 --> 00:00:25,560 Speaker 1: hasn't had a lot of attention is build to Rent. 7 00:00:26,000 --> 00:00:30,480 Speaker 1: Matthew Berg is the founder and co CEO of Local Residential, 8 00:00:30,560 --> 00:00:33,559 Speaker 1: a great supporter of this podcast. Matt, Welcome to Fear 9 00:00:33,560 --> 00:00:34,199 Speaker 1: and Greed Q and. 10 00:00:34,159 --> 00:00:36,280 Speaker 2: A thanks for having us here, Sean. 11 00:00:36,080 --> 00:00:38,400 Speaker 1: So just explain build to rent. 12 00:00:39,440 --> 00:00:41,960 Speaker 2: Well, the quick and easy and sort of slightly boring 13 00:00:42,479 --> 00:00:46,720 Speaker 2: explanation behind Bilter and Shawn is that it's institutionally owned housing. 14 00:00:47,320 --> 00:00:49,520 Speaker 2: But to go a little deeper into that, there's sort 15 00:00:49,520 --> 00:00:53,159 Speaker 2: of three main methods of creating supply in any country, 16 00:00:54,080 --> 00:00:56,760 Speaker 2: including countries outside Australia as well. If you think about it, 17 00:00:56,880 --> 00:01:00,800 Speaker 2: the government can create supply, they can create housing, and 18 00:01:00,840 --> 00:01:03,960 Speaker 2: then there's two other methods of creating supply, and one 19 00:01:04,040 --> 00:01:08,120 Speaker 2: is through selling say apartments or even houses off the 20 00:01:08,120 --> 00:01:11,640 Speaker 2: plan to mumudad investors. But the third method is is 21 00:01:11,680 --> 00:01:14,600 Speaker 2: build to rent. In other markets, it's sometimes known as 22 00:01:14,640 --> 00:01:19,199 Speaker 2: multifamily in the US, for example, but in that market 23 00:01:19,200 --> 00:01:23,360 Speaker 2: in the US it's existed for sort of thirty forty years. Actually, 24 00:01:23,360 --> 00:01:26,880 Speaker 2: in the UK it's a new asset classes. It's existed 25 00:01:26,880 --> 00:01:30,560 Speaker 2: for about ten years. But you know, with that, you know, 26 00:01:30,680 --> 00:01:34,400 Speaker 2: sort of new breed of class of housing, you've got 27 00:01:34,680 --> 00:01:38,240 Speaker 2: some really interesting opportunities to correct a lot of sort 28 00:01:38,240 --> 00:01:40,679 Speaker 2: of sins of the current market or issues within the 29 00:01:40,680 --> 00:01:45,039 Speaker 2: current rental market. The build to rent provides a solution 30 00:01:45,160 --> 00:01:48,640 Speaker 2: for and I'm sure I'm not sure if you've rented, 31 00:01:48,960 --> 00:01:51,520 Speaker 2: and if you had recently, but everyone's got horror stories 32 00:01:51,560 --> 00:01:53,880 Speaker 2: around renting. I certainly do you know you could have 33 00:01:53,880 --> 00:01:57,840 Speaker 2: a dilapidated house or apartment. You know, you've got very 34 00:01:57,840 --> 00:02:01,880 Speaker 2: slow maintenance requests. Times when you're signing up, there's virtually 35 00:02:01,920 --> 00:02:05,800 Speaker 2: no customer service. Perhaps you've got long leasing lines. But 36 00:02:05,960 --> 00:02:08,160 Speaker 2: probably the biggest issue for a lot of people, and 37 00:02:08,200 --> 00:02:10,200 Speaker 2: they're certainly experiencing it right now, is that there's not 38 00:02:10,240 --> 00:02:12,359 Speaker 2: a lot of security in their rental housing. 39 00:02:12,440 --> 00:02:14,960 Speaker 1: So so I want to get to that, but just 40 00:02:14,960 --> 00:02:16,560 Speaker 1: so I have this right in my head, like I 41 00:02:16,560 --> 00:02:20,120 Speaker 1: had this friend in Switzerland who the insurance company owns 42 00:02:20,160 --> 00:02:22,480 Speaker 1: his building and has owned the buildings around him forever, 43 00:02:22,520 --> 00:02:24,959 Speaker 1: and he's never thinking about actually buying house because that's 44 00:02:25,080 --> 00:02:27,760 Speaker 1: just what Swiss people do. You know, they've got these 45 00:02:27,800 --> 00:02:30,600 Speaker 1: long term leases in these places, and you're talking about 46 00:02:30,639 --> 00:02:34,120 Speaker 1: exactly the same things, sort of institutional money setting up 47 00:02:34,360 --> 00:02:36,320 Speaker 1: long term rentals for people. 48 00:02:36,760 --> 00:02:38,800 Speaker 2: That's right, exactly right. And Europe's you know, you hit 49 00:02:38,840 --> 00:02:40,320 Speaker 2: the nail on the head. Europe's had it for years 50 00:02:40,360 --> 00:02:43,440 Speaker 2: as well, and you know it's very much accepted in 51 00:02:43,480 --> 00:02:46,760 Speaker 2: those markets. Obviously, there's a cultural bias in Australia to 52 00:02:46,840 --> 00:02:50,560 Speaker 2: owning your house or homes, but we sort of see 53 00:02:50,560 --> 00:02:53,120 Speaker 2: that cultural bias is very much related to security. 54 00:02:53,400 --> 00:02:57,080 Speaker 1: Yeah, so where does it fit into our landscape? 55 00:02:57,160 --> 00:03:00,919 Speaker 2: Then? In terms of our landscape, I mean it's taking 56 00:03:00,960 --> 00:03:04,040 Speaker 2: the form at the moment of apartments. The sort of 57 00:03:04,440 --> 00:03:08,320 Speaker 2: I guess, quickest, most scalable way to create housing and 58 00:03:08,360 --> 00:03:10,639 Speaker 2: certainly manage it in a bill to rant sort of 59 00:03:10,720 --> 00:03:15,240 Speaker 2: multi family scenario is generally apartments, and that could be 60 00:03:15,280 --> 00:03:18,600 Speaker 2: super high density towers, or that could be which is 61 00:03:18,639 --> 00:03:20,760 Speaker 2: a you know, a tower we're developing in South Melbourne 62 00:03:20,760 --> 00:03:22,359 Speaker 2: of forty levels, or it could be a fairly sort 63 00:03:22,400 --> 00:03:24,760 Speaker 2: of low density apartment development. You know, we've got an 64 00:03:25,520 --> 00:03:27,799 Speaker 2: eight level development in Kensington that we completed a couple 65 00:03:27,800 --> 00:03:32,040 Speaker 2: of years ago. So but generally that's how the market 66 00:03:32,120 --> 00:03:34,600 Speaker 2: started in other areas as well, and so you know, 67 00:03:34,639 --> 00:03:37,440 Speaker 2: we will in time, I think see say single family housing, 68 00:03:37,440 --> 00:03:40,400 Speaker 2: which are just houses that are developed for rent. But 69 00:03:40,480 --> 00:03:41,800 Speaker 2: I think that's got a long way to go, and 70 00:03:42,000 --> 00:03:43,440 Speaker 2: obviously the market has to mature. 71 00:03:43,600 --> 00:03:46,080 Speaker 1: Okay, So the moment, if I'm a family might be 72 00:03:46,520 --> 00:03:48,600 Speaker 1: mundad and a couple of kids, or you know, the 73 00:03:49,120 --> 00:03:53,640 Speaker 1: parents and two kids and there's a place South Melbourne 74 00:03:53,840 --> 00:03:57,560 Speaker 1: forty stories I'm looking at that. It's not I'm like, 75 00:03:57,640 --> 00:04:00,320 Speaker 1: I'm not signing a rental agreement for six months here though, 76 00:04:00,400 --> 00:04:03,120 Speaker 1: am I. I'm signing it potentially for a lot longer 77 00:04:03,160 --> 00:04:03,360 Speaker 1: than that. 78 00:04:04,280 --> 00:04:06,480 Speaker 2: Well that's the beauty of it because we you know, 79 00:04:06,520 --> 00:04:09,320 Speaker 2: talking about specifics. We I meanimum rental terms are six 80 00:04:09,320 --> 00:04:11,600 Speaker 2: months and our longest rent or lease that we offer 81 00:04:11,640 --> 00:04:14,640 Speaker 2: us five years. So it's a home and you know, 82 00:04:14,640 --> 00:04:17,160 Speaker 2: we're not going anywhere. We're not an owner occupier in 83 00:04:17,160 --> 00:04:19,280 Speaker 2: our own right, so we're not going to be moving 84 00:04:19,320 --> 00:04:21,800 Speaker 2: back into the apartment. And so you do know you've 85 00:04:21,839 --> 00:04:25,200 Speaker 2: got that security there. Funnily enough, we offer these really 86 00:04:25,240 --> 00:04:28,440 Speaker 2: long lease terms, and once people understand that the kind 87 00:04:28,480 --> 00:04:31,479 Speaker 2: of theory behind what we're offering, why would you actually 88 00:04:31,520 --> 00:04:33,360 Speaker 2: sign up for a five year lease when you might 89 00:04:33,400 --> 00:04:36,000 Speaker 2: want you might even value a little bit of flexibility, 90 00:04:36,000 --> 00:04:38,880 Speaker 2: but you know you can keep renewing in place. The 91 00:04:38,920 --> 00:04:40,479 Speaker 2: only reason why you might do that is because we 92 00:04:40,480 --> 00:04:42,599 Speaker 2: actually offer a sort of a fixed rental increase during 93 00:04:42,600 --> 00:04:44,800 Speaker 2: that period of time too, So you know, certainty is 94 00:04:44,960 --> 00:04:47,400 Speaker 2: Certainty is valued around ten yere, but it's also valued 95 00:04:47,440 --> 00:04:49,279 Speaker 2: around budget two, which we're finding a lot of people 96 00:04:49,360 --> 00:04:49,960 Speaker 2: taking us up on. 97 00:04:50,320 --> 00:04:52,200 Speaker 1: Okay, and these apartments aren't I mean, you're just not 98 00:04:52,320 --> 00:04:56,440 Speaker 1: moving into a three bedroom apartment with two bathrooms because 99 00:04:56,640 --> 00:05:00,240 Speaker 1: often they're community so I'm talking shared spaces, Gym, just 100 00:05:00,360 --> 00:05:00,880 Speaker 1: explain that. 101 00:05:01,440 --> 00:05:03,920 Speaker 2: Sure. Yeah, So I mean if we own the building, 102 00:05:04,600 --> 00:05:06,680 Speaker 2: and we do own the building rather than you know, 103 00:05:06,800 --> 00:05:09,520 Speaker 2: say one one hundredth of the building, So in a 104 00:05:09,560 --> 00:05:13,000 Speaker 2: typical apartment project, you have the opportunity to control everything, 105 00:05:13,040 --> 00:05:15,279 Speaker 2: and that includes what you know, everything else that you 106 00:05:15,360 --> 00:05:18,440 Speaker 2: can put into it. And we've got pools both indoor 107 00:05:18,480 --> 00:05:21,840 Speaker 2: and outdoor in various developments we've got coworking, which is 108 00:05:21,839 --> 00:05:24,920 Speaker 2: obviously in Melbourne and you know Sydney as well, highly 109 00:05:25,000 --> 00:05:26,920 Speaker 2: valued at the moment for people who are still doing 110 00:05:26,920 --> 00:05:30,560 Speaker 2: a lot of work from home. We have wellness spaces 111 00:05:31,160 --> 00:05:34,080 Speaker 2: full time or sorry twenty four to seven gym, which 112 00:05:34,120 --> 00:05:36,240 Speaker 2: is really important to people as well because obviously there's 113 00:05:36,240 --> 00:05:42,920 Speaker 2: no excuses if it's literally downstairs excuse New Years News resolutions, 114 00:05:43,720 --> 00:05:46,640 Speaker 2: but the bookable dining spaces as well. We have cinema rooms, 115 00:05:47,080 --> 00:05:49,280 Speaker 2: you know, we have we have very bespoke amenity as 116 00:05:49,279 --> 00:05:51,560 Speaker 2: well for an area. So we're opening a building shortly 117 00:05:51,600 --> 00:05:53,000 Speaker 2: in box Hill in a couple of weeks. And we 118 00:05:53,040 --> 00:05:55,520 Speaker 2: have a marjong room which is which is obviously really 119 00:05:56,080 --> 00:05:59,240 Speaker 2: useful for that demographic, so and karaoke rooms in some 120 00:05:59,279 --> 00:06:01,919 Speaker 2: of our developments, and golf simulators in South Melbourne. So 121 00:06:02,360 --> 00:06:04,840 Speaker 2: all these sort of things are designed to allow you 122 00:06:04,880 --> 00:06:08,000 Speaker 2: to use the facilities when you want them. Obviously it 123 00:06:08,040 --> 00:06:10,160 Speaker 2: also helps you manage your budget. We're finding a lot 124 00:06:10,160 --> 00:06:12,760 Speaker 2: of people, for example, they've moved from a two bedroom 125 00:06:12,800 --> 00:06:15,880 Speaker 2: apartment to one of our one bedrooms because that second 126 00:06:15,880 --> 00:06:18,200 Speaker 2: bedroom is actually a utility room in practice in their 127 00:06:18,240 --> 00:06:20,920 Speaker 2: current premises, so you know they can use our gym, 128 00:06:21,040 --> 00:06:22,839 Speaker 2: or they can use our coworking. They don't have to 129 00:06:23,040 --> 00:06:25,240 Speaker 2: they don't have to work in the second bedroom anymore. 130 00:06:25,480 --> 00:06:29,760 Speaker 1: So in terms of cost, I presume we should value 131 00:06:29,800 --> 00:06:32,200 Speaker 1: it as whether it's cost effective, whether it's value for money. 132 00:06:32,320 --> 00:06:33,080 Speaker 1: Where does it sit? 133 00:06:33,839 --> 00:06:36,680 Speaker 2: Yeah, sure, I mean in terms of you know, where 134 00:06:36,680 --> 00:06:38,919 Speaker 2: they're sort of cost and value sit. You know, obviously 135 00:06:38,920 --> 00:06:42,640 Speaker 2: we're adding in all these additional amenities and we the 136 00:06:42,720 --> 00:06:44,840 Speaker 2: least some guys do a really good job of sort 137 00:06:44,839 --> 00:06:47,080 Speaker 2: of breaking them out in a financial sense for our 138 00:06:47,120 --> 00:06:50,200 Speaker 2: customers to make sure that they know that. You know, 139 00:06:50,279 --> 00:06:52,919 Speaker 2: you're getting a gym membership here, you're getting a coworking membership. 140 00:06:53,120 --> 00:06:56,480 Speaker 2: By the time you sort of add all those things up. Generally, 141 00:06:56,560 --> 00:06:59,080 Speaker 2: we find and this is the same with sort of 142 00:06:59,080 --> 00:07:00,760 Speaker 2: all built to around in this sty there's sort of 143 00:07:00,800 --> 00:07:05,440 Speaker 2: ten to fifteen percent increase versus a typical apartment. But 144 00:07:05,480 --> 00:07:08,280 Speaker 2: then you're also valuing the security that comes with Bill Terrant, 145 00:07:08,360 --> 00:07:11,440 Speaker 2: the on site you know, team, and all of those 146 00:07:11,440 --> 00:07:12,800 Speaker 2: additional benefits to come with it. 147 00:07:13,240 --> 00:07:15,520 Speaker 1: So who does it suit and who doesn't it suit? 148 00:07:16,560 --> 00:07:19,040 Speaker 2: Well, look, I think in terms of who it does suit, 149 00:07:19,800 --> 00:07:22,440 Speaker 2: you know, I think you know, there's a few different examples. 150 00:07:22,720 --> 00:07:24,680 Speaker 2: There's many examples, but I'll sort of try and give 151 00:07:24,680 --> 00:07:26,480 Speaker 2: you almost like a bit of a case study. I'd 152 00:07:26,560 --> 00:07:32,680 Speaker 2: say that person, let's just call him Michael, who has 153 00:07:32,760 --> 00:07:37,760 Speaker 2: young kids, who is perhaps been in rental properties, lived 154 00:07:37,760 --> 00:07:41,160 Speaker 2: in sharehouses, been perhaps you know, rotated through in and out. 155 00:07:41,200 --> 00:07:44,120 Speaker 2: Maybe they left off their own accord. Maybe they've maybe 156 00:07:44,120 --> 00:07:46,320 Speaker 2: they've been pushed out and they've sort of got a 157 00:07:46,320 --> 00:07:48,640 Speaker 2: young family or a partner, or they've started a business 158 00:07:48,680 --> 00:07:50,760 Speaker 2: for example, or they need to be in a particular location. 159 00:07:50,800 --> 00:07:54,280 Speaker 2: They value that security, the value knowing that they're going 160 00:07:54,360 --> 00:07:57,160 Speaker 2: to be able to stay in place. You know, that 161 00:07:57,280 --> 00:08:00,640 Speaker 2: young family or someone with a young young person with 162 00:08:00,640 --> 00:08:02,960 Speaker 2: a partner, you know that is that is high on 163 00:08:03,000 --> 00:08:06,480 Speaker 2: their list. But then conversely, you know, we've got a 164 00:08:06,520 --> 00:08:09,200 Speaker 2: lot of very young people, say it may even be 165 00:08:09,280 --> 00:08:11,200 Speaker 2: their first home, they've been living at home for a while, 166 00:08:11,200 --> 00:08:14,080 Speaker 2: they've had a first job. They value other things, so 167 00:08:14,080 --> 00:08:17,040 Speaker 2: they value the amenities. They value the events we hold events, 168 00:08:17,200 --> 00:08:20,080 Speaker 2: and obviously events are great ways to introduce people to 169 00:08:20,120 --> 00:08:22,720 Speaker 2: the building and make sure that they immediately have friends, 170 00:08:23,520 --> 00:08:26,400 Speaker 2: and it can feel a little bit connected to the community. 171 00:08:26,480 --> 00:08:30,280 Speaker 2: So Christmas parties and grand final parties, and you know 172 00:08:30,320 --> 00:08:35,320 Speaker 2: we have Bingo nights and pilates, Marjong nights soon, Marjong 173 00:08:35,440 --> 00:08:38,240 Speaker 2: nights soon exactly. So you know, those people sort of 174 00:08:38,320 --> 00:08:40,440 Speaker 2: value the amenity in the building, they value the on 175 00:08:40,520 --> 00:08:43,080 Speaker 2: site team, and they value the events and the connectedness. 176 00:08:43,120 --> 00:08:45,760 Speaker 2: So I think it's got a lot for everyone. But 177 00:08:45,880 --> 00:08:48,160 Speaker 2: even I'd say in terms of who it doesn't suit. 178 00:08:48,320 --> 00:08:50,319 Speaker 2: It obviously doesn't suit someone who's living in their own 179 00:08:50,320 --> 00:08:53,040 Speaker 2: home that they own. But I say that, and then 180 00:08:53,200 --> 00:08:55,360 Speaker 2: we have a lot of interest from people, and we've 181 00:08:55,400 --> 00:08:56,959 Speaker 2: got a few that have moved in that are doing 182 00:08:57,000 --> 00:08:59,800 Speaker 2: renovations on their home, you know, because they might want 183 00:08:59,840 --> 00:09:02,800 Speaker 2: to nine month lease because they think they can renovate 184 00:09:02,800 --> 00:09:04,719 Speaker 2: their house in nine months and they don't want to 185 00:09:04,720 --> 00:09:08,319 Speaker 2: pay for twelve and they want full furniture and divorces 186 00:09:08,360 --> 00:09:10,320 Speaker 2: and things like that too. That's a real thing obviously, 187 00:09:10,400 --> 00:09:14,280 Speaker 2: and you know people need a meeting accommodation's that's very 188 00:09:14,280 --> 00:09:16,439 Speaker 2: suitable and and up to spec. 189 00:09:17,000 --> 00:09:19,480 Speaker 1: Just explain your own business model then, so let's talk 190 00:09:19,480 --> 00:09:22,359 Speaker 1: to the business side, not so much that your customers, 191 00:09:22,360 --> 00:09:27,319 Speaker 1: but local residentials. So it's local sorry, local colon residential. 192 00:09:27,320 --> 00:09:31,480 Speaker 1: If anyone's looking for it, local residential. What's the business model? 193 00:09:31,520 --> 00:09:35,320 Speaker 1: So the institutional money is from it from super funds, 194 00:09:35,320 --> 00:09:39,040 Speaker 1: it's from institutional vest as broadly, I presume that's right. 195 00:09:39,080 --> 00:09:41,319 Speaker 1: And are you building these properties? I'm just interested in 196 00:09:41,360 --> 00:09:42,040 Speaker 1: the business model. 197 00:09:42,600 --> 00:09:45,040 Speaker 2: Yeah, Obviously the name build to rent kind of implies 198 00:09:45,080 --> 00:09:47,240 Speaker 2: there's some sort of development going on on building going on. 199 00:09:47,320 --> 00:09:50,240 Speaker 2: So we, yeah, we do develop our own property, so 200 00:09:50,280 --> 00:09:53,240 Speaker 2: we're a development manager, but then we're the fund manager 201 00:09:53,240 --> 00:09:55,480 Speaker 2: of the funds and also the property managers, so we 202 00:09:55,600 --> 00:09:58,320 Speaker 2: manage the properties on completion, and we hire the on 203 00:09:58,360 --> 00:10:01,440 Speaker 2: site team so their local staff. So our business model 204 00:10:01,760 --> 00:10:04,600 Speaker 2: is sort of simply as you've implied, which is we're 205 00:10:04,600 --> 00:10:07,720 Speaker 2: an integrated build to rent group and we invest our 206 00:10:07,760 --> 00:10:10,960 Speaker 2: own money as well as other institutional capital that we manage, 207 00:10:11,320 --> 00:10:14,400 Speaker 2: just like another sort of fund manager another Reek for example, 208 00:10:15,000 --> 00:10:19,520 Speaker 2: into those assets. And they're very attractive right now because well, 209 00:10:19,520 --> 00:10:21,280 Speaker 2: I would argue for a very long period of time 210 00:10:21,320 --> 00:10:26,200 Speaker 2: because you know, Australian apartments residential in general as well, 211 00:10:26,240 --> 00:10:29,960 Speaker 2: you know, has had very durable rental returns. You know, 212 00:10:30,240 --> 00:10:32,520 Speaker 2: we don't see a lot of volatility in them. And 213 00:10:32,880 --> 00:10:37,120 Speaker 2: obviously geopolitically Australia is looking very good right now, as 214 00:10:37,200 --> 00:10:39,240 Speaker 2: is the economy that I hear from you guys all 215 00:10:39,280 --> 00:10:43,960 Speaker 2: the time. So no, it's absolutely a very investable asset 216 00:10:43,960 --> 00:10:46,400 Speaker 2: class and there's not really anything that mimics it in 217 00:10:46,640 --> 00:10:48,400 Speaker 2: Australia at the moment. Why I think it'll. 218 00:10:48,160 --> 00:10:51,480 Speaker 1: Grow fantastic, Matt, Thanks for talking to Fear and Greed Pleasure. 219 00:10:51,520 --> 00:10:54,040 Speaker 1: Thanks Sean as matt Berg, founder and co CEO of 220 00:10:54,320 --> 00:10:59,240 Speaker 1: Local Residential. That's local colon Residential. Hey, great supporter this podcast. 221 00:10:59,240 --> 00:11:01,640 Speaker 1: To find out more of is it local residential dot 222 00:11:01,679 --> 00:11:04,400 Speaker 1: com dot au. That's just one word, local residential dot 223 00:11:04,440 --> 00:11:07,000 Speaker 1: com dot A. You or click the link in the 224 00:11:07,040 --> 00:11:09,760 Speaker 1: show note below. I'm Sean Alm and this is here 225 00:11:09,800 --> 00:11:10,559 Speaker 1: and breed Q and A.