Lendlease secures Japanese giant for Melbourne tower and sells Sydney office for $360m

A Lendlease-managed fund and Aware Super have sold Darling Square, Sydney to Barings. Picture: JLL

Property giant Lendlease has struck a series of deals showing its ability to win backers for its projects, with a Japanese company supporting a project in Melbourne and one of its funds selling a building in Sydney.

In Melbourne, the under-pressure heavyweight added to its line-up of international backers by locking in a partnership with Japanese real estate company Tokyo Tatemono that will take a stake in a build-to-rent tower in the Docklands. Lendlease secured the company to back 899 Collins Street, Docklands, which has already been supported by another Japanese firm, Nippon Steel Kowa Real Estate.

Japanese investors have surged into the build-to-rent market, essentially underwriting a series of major projects this year by developers including AsheMorgan and Mirvac.

They are willing to back the sector as they are familiar with the concept in their home market and they have reaped healthy returns from backing the projects in Australia.

Tokyo Tatemono, which is listed on the Nikkei 225, will take a minority equity stake from Lendlease in the $500m development. Founded in 1896, the company is a top residential and commercial developer in Japan.

Sitting on the western edge of the CBD, 899 Collins will have 499 build-to-rent residences across 24 levels, offering a mix of studio, one, two and three-bedroom apartments. The block is in the heart of Lendlease’s Victoria Harbour precinct and has access to luxury retail, restaurants and cultural landmarks as well as the Yarra River.

Lendlease and Nippon Steel Kowa Real Estate will develop build-to-rent apartments at 899 Collins Street in the Docklands.

Lendlease chief executive, development Tom Mackellar said the existing partnership with NSKRE was instrumental in shaping the build-to-rent project. “Welcoming a highly-aligned partner in Tokyo Tatemono to the project reflects the strength of our shared vision and growing confidence in the sector.” he said.

In Sydney, Lendlease’s APPF Commercial fund and co-owner Aware Super have sold a Darling Harbour office building for $360m to global fund manager Barings.

The sale of the A-grade Darling Square building comes as the gateway office market locks in its recovery, with capital again looking to get set at an early part of the turnaround. The deal was brokered by agents JLL and CBRE.

The move comes as Aware separately looks at taking out a 75 per cent interest in Lendlease’s Victoria Cross development in North Sydney for close to $900m. The fund emerged as a key supporter of Lendlease as it fought off a bid from Hostplus to sack it as the manager of the overall $10bn APPF property empire.

The deal, via Barings’ fifth Real Estate Australia Value Add Fund, is a major addition to its local portfolio and underscores its commitment to investing in premium-grade offices.

Lendlease developed the building in 2019 and it spans 27,750sq across 13 levels, including office floors, retail tenancies, and 451 parking spaces. The property is anchored by the Commonwealth Bank.

Barings Real Estate Australia executive director, investment management Shaun Hannah said Darling Square was “a best-in-class asset” in Sydney’s vibrant Darling Harbour precinct. “This acquisition aligns with our strategy to deliver resilient income and capital growth for our investors,” he said.