Japanese make property return with a local twist via partnerships with big players

The big names have returned to the Australian property scene but are avoiding the mistakes of the bubble economy that led to their ignominious retreat from local projects.

Japanese property developers are re-emerging as a force on the local property scene with big-time developer Mitsui Fudosan teaming up with Frasers on a major apartment precinct in Sydney’s northern suburbs worth close to $1bn.

They are making a big comeback into the Australian market – but are adopting very different tactics from the 1980s boom, which ultimately brought them to grief.

Instead of going it alone in making big strides in both residential and commercial projects, big Japanese companies are now teaming up with local developers and pursuing mid-range high-rise projects and office blocks, while steering clear of luxury hotels and resorts, which led to a painful exit from the collapse of the 1990s.

Most of Australia’s large listed companies now have development ventures with Japanese companies in progress. Big players including Lendlease, Mirvac and Stockland have each done projects with Japanese groups.

Lendlease snapped up the One Circular Quay site in Sydney with the backing of Mitsubishi Estate Asia, and they are pursuing a $3bn-plus apartment and hotel project.

Mitsubishi also set up a partnership to develop and own land lease communities with residential developer Stockland. And in the hot build-to-rent industry, a branch of Mitsubishi also took a stake in Mirvac’s build-to-rent operation and will back the 5000-unit portfolio being assembled around the country.

Others have been active in offices, with real estate house Daibiru backing a $630m office project in the Melbourne CBD being undertaken by Mirvac. Other names like Sekisui House are expanding their own operations directly into Australia.

Frasers said it had strengthened its capital partnership with Japanese diversified group Mitsui Fudosan to deliver three additional apartment developments, with a combined estimated end value of $797m, at the $2.2bn Midtown MacPark masterplanned community in Sydney.

Lendlease snapped up the One Circular Quay site in Sydney with the backing of Mitsubishi Estate Asia, and they are pursuing a $3bn-plus apartment and hotel project.

The pair are currently developing the estate’s first building, MAC Residences, in a joint venture established in early 2022. Now, the expanded 50-50 partnership spans four buildings, including the landmark Treehouse development. In all, the venture is developing a total of 1149 apartments and four terraces across the four buildings.

Frasers executive general manager investments Mark Gleeson says the deepening of the partnership aligned with the firm’s strategy of using capital partnerships to hit its growth objectives.

“Working together to deliver MAC Residences at Midtown MacPark has demonstrated the strong alignment in values and priorities between Frasers,” he said.

The partnership with Frasers Property in MAC Residences was Mitsui Fudosan’s first foray into the Australian market and the expanded venture at Midtown MacPark is their second. It had earlier looked at backing an office skyscraper that was to be developed by Investa in the Sydney CBD but that project did not go ahead.

“It makes sense to take our growth in the Australian market to the next level by contributing our expertise to a high-quality community development with a partner we know,” Mitsui Fudosan Australia managing director Kenji Oka said.

Designed by Bates Smart, MAC Residences is the first building at Midtown MacPark and of its 269 apartments, only seven remain unsold. The development is slated to finish this year and Treehouse will have 162 apartments, green breakout spaces and ground floor retail space.

Other buildings will be launched in coming years and will total about 3300 units, with an affordable component. The venture between Frasers and Mitsui Fudosan will handle the next 216 community housing units.