Lendlease in talks with Crown Estate of King Charles for Euston Station, London projects

The Australian developer is finalising a deal with King Charles’ Crown Estate to cut its exposure to a series of a high-profile London projects as it focuses on its home operations.

Lendlease is striking a deal with The Crown Estate on its major British developments.

Property developer Lendlease is in talks with Britain’s The Crown Estate to set up a joint venture over its major schemes across England as it speeds up its exit from offshore development projects.

The company has pledged to bring home more than $4bn worth of capital and has been seeking a way out of low-returning projects that had the potential to tie up billions of dollars.

Lendlease and the Crown Estate are thrashing out a deal that would see the King’s property entity emerge as a 50/50 partner on the development projects that have an end value of about £22bn.

Trade publication Green Street News said the Crown Estate would enter joint ventures to take on six of Lendlease’s schemes in one of the largest steps in bringing back capital to Australia.

Lendlease confirmed that it was “aiming to accelerate the release of capital from international development through capital partnering, joint ventures and land sales, while maximising the value it has created across the portfolio”.

The company said negotiations were in late stages with The Crown Estate to enter a 50/50 joint venture over the projects in its UK development portfolio to release longer-dated capital at or slightly above book value, halve its future funding obligations, accelerate master planning with British government clients and generate future fee income.

Artists impression of Lendlease's plans for a multi-billion pound urban redevelopment project.

The Australian company said that if a deal was concluded, the arrangements being negotiated would see it earn fees as master developer of existing projects on behalf of the joint venture, with the cost to progress master planning and create further value expected to be self-funding through portfolio land sales.

Lendlease would remain involved overseeing the massive regeneration sites that have the potential to yield more than 25,000 homes and associated commercial space but would not be the hook for the billions in potential funding.

Once the Crown deal is locked in, Lendlease would instead chase other capital partners, in line with its ambition to stay involved with international funds management.

The Australian company went on a development deal spree that started about a decade ago, securing a series of big-ticket development deals in the British capital that would ultimately contribute to its undoing as the market soured during the coronavirus crisis and profits were distant.

Lendlease is development partner for the projects including the £4.9bn Silvertown Quays projects in the Royal Docks, the High Road West Estate regeneration projects, the Stratford Cross office precinct and the £1.9bn Smithfield Market site in Birmingham.

The company is also master developer on the £5.5bn over-station development at London’s Euston station which has been embroiled in uncertainty.

In a twist of fate, The Crown Estate is now run by former Lendlease executive Dan Labbad, who was instrumental in the Australian company’s international expansion. But he had departed well before the company reversed course to focus on the local projects.

Lendlease said its immediate focus would be on progressing its master planning obligations, while retaining the rights for any vertical developments. The company expects the joint venture will create an “industry-leading alliance” with sector and local experience to accelerate planning and project delivery.

Lendlease shares reacted positively but were flat later in the day, dipping 1c to $5.47 in afternoon trade.

The move will bolster the company’s plans to refocus on its Australian operations where it needs capital to pour back into luxury residential schemes and precinct-size plays where it sees its competitive advantage.

But it still has substantial assets to offload, with holdings ranging from Chinese seniors living, property in Malaysia, and a stake in its local retirement living platform on the block.

The company has made some progress in selling offshore assets and has already sold its British construction arm and exited US construction and US military housing. Local sales include offloading a stake in infrastructure business Capella Capital and a dozen housing estates to a Stockland venture for $1.3bn.

Originally published as Lendlease in talks with Crown Estate of King Charles for Euston Station, London projects