Lendlease wins Japan’s Mitsubishi Estate and Nippon Steel to back Hyde Park towers

Lendlease is turning to Japanese capital to back its latest $2.5bn development scheme, with two big names supporting Sydney’s next ultra-luxury site.

An artist’s impression of Lendlease’s plans for 175 Liverpool Street, Sydney.

Lendlease has put its ability to marshal international capital behind its development pipeline on display by bringing in two Asian heavyweights to support its planned $2.5bn residential project overlooking Sydney’s Hyde Park.

The company has tapped both long-time partner Mitsubishi Estate Asia and a newer backer, Nippon Steel Kowa Real Estate, to support its play for the office block at 175 Liverpool Street, which will make way for the striking luxury apartment project.

Lendlease has tied up a venture with the pair after securing the site earlier this month from Chinese-Australian billionaire Hui Wing Mao, who is exiting after extended off-market talks.

It is planning to demolish the existing block and redevelop the site as two luxury residential towers with up to 300 apartments and 2000sq m of retail and commercial space.

The deal would mark the seventh investment partnership Lendlease has undertaken with Mitsubishi Estate Asia in recent years.

The high-profile project roster includes One Sydney Harbour at Sydney’s Circular Quay and the One Darling Point project in the city’s eastern suburbs.

The Japanese company has also invested in Lendlease’s East Tower Residences in Melbourne, as well as supporting other developers as they undertake residential and commercial projects.

An artist’s impression of Lendlease’s plans for luxury apartment towers at 175 Liverpool Street, Sydney.

The other party the listed company is getting backing from is Nippon Steel Kowa Real Estate, which struck its first deal with Lendlease to back a $500m build-to-rent apartment development in Melbourne’s Docklands precinct last October.

Japanese investors are making the running in the commercial property sector, with deal-making that has seen them push into fields ranging from housing to logistics real estate and office skyscrapers.

Under the terms of the agreement at Liverpool St, MEA will take a 33 per cent equity share in the joint venture, and NKSRE a 17 per cent share.

Lendlease chief executive, development, Tom Mackellar, said the acquisition of 175 Liverpool St built on the company’s success in Sydney’s luxury residential market, as they continue to add to its development pipeline in Australia.

“We look forward to working alongside our trusted development partners, Mitsubishi Estate Asia and Nippon Steel Kowa Real Estate, on this landmark development in one of Sydney’s most sought-after locations,” Mr Mackellar said.

Another large Japanese company, Sumitomo Forestry, last year bought a majority stake in Australia’s largest home builder, Metricon, and the companies have also been highly active in build-to-rent schemes.

Lendlease is seen as a trusted player by Japanese capital as it is in the top echelon of local property developers and fund managers.

Chief executive Tony Lombardo has put funds management at the heart of the company’s strategy and wants to bring in more external capital to support its growth locally.

Senior Lendlease executives including investment management head Justin Gabbani, chief investment officer Penny Ransom and head of Japanese partnerships Andrew Gauci, have built up close ties with Japanese investors over recent years, alongside several major Korean funds including the National Pension Service of Korea.

The Korean fund recently awarded Lendlease the mandate to manage Sydney’s Aurora Place and it also bought the Lendlease-developed Melbourne Quarter Tower, when it was under construction in 2021.

Lendlease Group CEO Tony Lombardo. Picture: Arsineh Houspian

The Liverpool St deal will mean the developer will have struck up joint ventures and mandates spanning $18bn with Japanese and Korean capital over the past few years.

Getting backers on board for the Liverpool St play shows Lendlease’s commitment to its new model of bringing in capital to large projects early, both to get them underway and to boost funds income.

Mr Lombardo has flagged that the company wants to work with its roster of global investors on large projects at earlier stages.

While the competition for sites in major capitals remains fierce, as a wide variety of private and foreign groups are chasing stock as the residential market heats up again, Lendlease’s advantages include having an internal building unit, access to the very top end buyers locally and offshore, and the ability to take on huge projects by drawing on its network of capital partners.

The pocket in which Lendlease is developing is to be substantially transformed in coming years. Sydney developer Central Element has teamed with MaxCap Group to propose 42 luxury residences with panoramic views of Hyde Park and over the Royal Botanic Gardens, and Deicorp is working on its 55-level Hyde Metropolitan project.

Funds heavyweight Charter Hall also has a scheme for a luxury apartment and hotel project at 201 Elizabeth Street.

It has had offers on the site after a process it ran but is also positioned to undertake it, with the backing of partners, if the luxury residential market keeps improving.

That commercial building, and others nearby, also have increasing value as offices as some large towers are taken out of the market for residential conversions.

Originally published as Lendlease wins Japan’s Mitsubishi Estate and Nippon Steel to back Hyde Park towers