Lendlease could develop a 10,000 strong network of rental apartments

Developer Lendlease will look to add apartments to some of the country’s top shopping malls. Find out which are being sized up for new towers.

Apartments could be developed at Lakeside Joondalup in Perth in future.

Lendlease chief executive Tony Lombardo has flagged the property company will build up a network of 10,000 build-to-rent units as it looks to address the national housing crisis.

The strategy is part of how he intends to keep a key shopping centre fund under Lendlease management, calling out its unique capacity to develop apartments in locations on massive retail sites. The $2.8bn fund has stakes in properties from the Sunshine Coast in Queensland to Sydney’s western suburbs.

The property group is meanwhile accelerating moves to return about $4.5bn of capital to its core operations in Australia, striking a joint venture with the Crown Estate in Britain last month, and intending to restock its local developments.

“I’m looking to ensure more of our capital is invested in Australia,” Mr Lombardo said.

The Lendlease CEO said the company had 1800 build-to-rent units underway locally and another 2000 in the pipeline, adding to its international projects in the hot sector in the United States.

Sunshine Plaza on the Sunshine Coast, Queensland.

“We are the most experienced with both local and international capability. None of our peers have that,” Mr Lombardo said, noting the relatively small scale of many rivals, some of which have found developing in Australia tough. But meeting the housing challenge remains elusive.

“We need to really evolve the sector … housing is an important issue that we’ve got to solve,” he said. While Lendlease has sold off the bulk of its housing estate operations to a Stockland venture for $1.3bn, it is now focused on urban development where both build-to-rent and build-to-sell would be critical, he said.

Lendlease has two build-to-rent projects in Melbourne and another in Brisbane, where it is also working with the Queensland government on the Athletes Village at the Brisbane Showgrounds. It is also bidding for the development parcel next to the Sydney Fish Markets which could include some build-to-rent apartments.

Mr Lombardo said the company was aiming to support investors in the APPF Retail Fund to unlock an estimated 2250 units that could be built above and around its shopping centres, as part of its overall expansion.

“I would like to see ourselves in Australia have 10,000 built-to-rent [units] under control in the coming years,” he said.

APPF Retail had been selling off shopping centres to meet liquidity requirements from exiting investors but says these have been satisfied and is now looking at opportunities for the five assets it controls.

The fund owns 50 per cent interests in the centres in Sunshine Plaza and Westfield Carindale, both in Queensland, as well as in NSW centres Macarthur Square and Erina Fair, and has a 50 per cent interest in Lakeside Joondalup in WA.

Macarthur Square shopping centre.

Mr Lombardo emphasised that the $50bn investment management arm remains critical to his strategy for turning the company around. Lendlease has about $750m of capital backing the APPF series.

He pointed to the company’s $200m of capital in the retail fund and its $2bn development pipeline, 85 per cent of which is residential units, which will be either sold individually or held as rental units.

The company expects fund investors to reap 11 to 13 per cent annual returns.

Despite its sell-offs, the retail fund is a top quartile performer over the last five years, and the expected returns are above rival core funds. “It’s delivering on some of the development of that alpha that’s embedded in the fund; that’s where it can actually increase the performance,” Mr Lombardo said.

Lendlease has undertaken a roadshow across its retail, office and industrial funds and about $200m worth of capital is looking to invest via the secondaries market. It will also back projects in its fund with its own capital.

“I’m prepared to put some capital in to unlock that as we move forward in this next phase of this asset plan,” Mr Lombardo said.

Originally published as Lendlease could develop a 10,000 strong network of rental apartments