Property and investor group Lendlease on the hunt for local sites

Lendlease has been on the back foot as the cycle turns, but its local arm is chasing fresh property deals.

Global developer and investor Lendlease in November gave a downbeat take on how its key units were performing in the harder global economy, but is flagging its local arm is open to chasing new private projects.

The move is a tack away from its well-known focus on urban regeneration precincts in major cities.

In this space, it sports a track ­record including Sydney’s Barangaroo, and it is working on Melbourne Quarter, alongside mega-jobs in Britain and the US.

Many of the super-scale projects involve decades of work securing and then completing government-led tenders. By nature, they are high-risk and contentious, and their long-dated returns can be hit by a range of forces.

Now, Lendlease’s efforts to ­become a sleeker beast are seeing it change how it operates. This is partly a necessity as its balance sheet is constrained. But it is also a change of mindset.

Changes afoot include bringing partners aboard earlier on large ­developments and scouting for private sector jobs.

Already, it is working with billionaire publican Justin Hemmes, rival Mirvac and Coombes Property Group on a bid to develop two skyscrapers above a planned metro station in the Sydney CBD.

Lendlease managing director, ­development, Tom Mackellar, says the strategy is yielding benefits, pointing to the company winning the backing of Singapore’s Keppel REIT when it bought the Blue & William project in North Sydney.

“We bring the ability to wrap the construction risk, and we can manage the lease up of an office building really well,” Mr Mackellar said.

Lendlease is developing and managing Blue & William in North Sydney.

Mr Mackellar said the model really came ­together on One Circular Quay, where Lendlease took on the backing of big Japanese house Mitsubishi ­Estate early, giving it an edge in winning the site where it is developing a luxury $3bn hotel and apartment towers.

The shift not only opens the company up to new ideas and ways of doing business, it also should mean it is not only riding large project wins.

“When we look at an opportunity we’re now looking at who the right partners are to bring into that opportunity upfront, that can make us most competitive,” he said. This is a big shift from controlling the entire property chain and always building.

“It’s a mindset shift of let’s think about how do we bring the best team to the opportunity,” Mr Mackellar said. And more private projects are on the way with the company now more frequently seen as a deal-doer, rather than simply taking on massive urban renewal projects.

“We’ve been very focused on how do we unlock opportunities in the private sector,” Mr Mackellar said. And it is working. “The amount of inbound inquiry we’re getting is exponentially growing because people are seeing the shift in strategy.”

The turn in the property cycle is also opening doors. Mr Mackellar said some players might have been able to start a project, but are now looking to share the risks.

But the financial metrics need to work. “We also need the opportunities to fit within our strategy, which is really to look at inner urban opportunities in great locations, which have very close proximity to transport,” Mr Mackellar said.

And the group’s ESG credentials help. “We need to have the ability to impact sustainability outcomes,” he said. “What we’re finding is an abundance of opportunity when you change your mindset.”

Lendlease is also more active in newer forms of housing, and is looking to add social and affordable components to its developments, as well as undertaking build to rent, with a first site to be in Brisbane. It is already tendering on the redevelopment of Sydney’s Waterloo Estate and is short-listed with St George Community Housing, against three major ­consortia.

Mr Mackellar said some Australian cities ranked as the least affordable worldwide, and the country needed to shift that equation. He sees more diverse kinds of housing as critical, and the company advocates 15 per cent affordability targets and a similar quantum for alternatives like build to rent.

“I would put it in the crisis bucket,” he said. “And it will end up being a drain on talent from the city; we won’t attract migrants to live here.”

He says the local industry is yet to fully tackle the challenge, but it is being taken up with the company ­focused on high quality projects at different price points.

Lendlease skyscrapers have redefined the top end of the market at Sydney’s Barangaroo, but it is also on the hunt for mid-market sites, and it wants to offer up solutions.

Mr Mackellar notes that housing is high on the agenda of governments and the company is keen to help.

“I don’t look at it as an extra burden. I look at it as this is what we must do in the first instance. And this is our licence to operate and work with these communities to deliver great outcomes and create a great city.”