Lendlease strikes deal for $2.8bn office venture in London

The company’s latest alliance extends its tie-up with a Canadian funds group as it looks to accelerate its projects.

Lendlease CEO Tony Lombardo has flagged that the company will step up annual production to $8bn annually. John Feder / The Australian

Listed real estate company Lendlease has won the backing of the heavyweight Canada Pension Plan Investment Board to develop a £1.5bn ($2.78bn) office precinct in the British capital.

The deal defies both the surging omicron outbreak, which is prompting a new wave of stay at home work in London, and concerns that the global developer’s $100bn-plus pipeline of work could be hit.

New chief executive Tony Lombardo has flagged plans to get the company developing $8bn of projects a year but it will take time for the Lendlease to hit this rate.

As part of these plans, Lendlease has set up a 50:50 joint venture partnership to develop a new office-led neighbourhood at International Quarter London with CPP Investments.

The deal builds on Lendlease and CPP Investments’ existing joint ventures, which include established projects at Elephant Park in London, Barangaroo in Sydney, and the Milano Innovation District, Italy.

The partnership has initially committed to developing the Turing Building, allocating about £215m from the joint venture. The Turing Building is one of four major new office buildings planned for the precinct.

The buildings will sit at the gateway of the Queen Elizabeth Olympic Park and near the Westfield Stratford shopping centre and the new leisure, culture and higher education offer at the East Bank development and surrounding area.

Construction on the Turing Building, which has been designed by award-winning architects Arney Fender Katsalidis, is expected to begin in early 2022. The neighbouring offices already house Transport for London, Cancer Research UK, the British Council and Unicef.

Lendlease Europe managing director, development, Bek Seeley, was bullish about offices returning after the pandemic.

“Following a challenging year, with Covid-19 bringing uncertainty to economies across the globe, this deal is a real vote of confidence in future workplaces and London’s office market more broadly,” Ms Seeley said.

CPP Investments head of UK real estate, managing director, Tom Jackson, said Stratford was one of the city’s fastest growing submarkets.

Morningstar analysts said that Lendlease is in a transformation phase, exiting engineering, concentrating on its urbanisation pipeline and shifting focus from Australia to overseas.

“Its plans to accelerate its massive development pipeline by selling stakes in some projects. We think it’s a good move, and expect the group to break ground on more overseas sites, increase sales, and improve its disclosure,” the research house said.

But the analysts cautioned that projects that ranged over decades held risks leading to higher uncertainty.

Lendlease closed 19c higher at $10.58 on Tuesday ahead of the transaction being announced after market.