Lendlease lands Japanese investors for $1.5b London tower
Builder, developer and fund manager Lendlease has won investment from two Japanese real estate companies into a $1.5 billion new office tower it manages and partly owns in London.
The two Japanese groups – Sotetsu Urban Creates and Yasuda Real Estate – are new to Lendlease’s investment management stable and will take a combined 20 per cent stake, worth $131 million, in the 53,000-square-metre tower rising above Moorgate station.
That stake was bought from Lendlease itself which before the deal had a 25 per cent interest in the equity – last valued at $168 million – in the partnership that owns 21 Moorfields. Other investors in the vehicle include NSW Treasury Corporation. Gearing in the fund is 55 per cent, taking the building’s overall value to $1.5 billion.
The deal is a win for Lendlease which is in the thick of a wide-ranging overhaul of its business that aims to reduce its global exposure and liberate capital to invest into Australia, its best-performing market.
While reducing its direct global footprint as a developer and builder, Lendlease has been keen to maintain its role as an investment manager.
The introduction of the two Japanese investors comes after Lendlease announced last month that it had secured $1.5 billion in mandates for its investment management arm, including from an existing investor in Australian office property and from others into Asian real estate.
On Tuesday, Lendlease also said it had finalised the previously announced sale of its UK construction business to Atlas Holdings, completing its exit from its global construction operations.
“The exit of international construction builds on our progress to simplify Lendlease as we look to lower our risk profile and increase security holder returns,” said chief executive Tony Lombardo.
“As we further progress capital recycling initiatives, we remain focused on capital return, growth opportunities across our core business and the creation of value for security holders.”
Last year, under pressure from investors, Lombardo committed to a radical turnaround plan, to sell off the international construction business and progressively divesting development assets abroad which include major projects slated for the US, UK and Europe.
It is also rationalising its efforts in Australia, selling a portfolio of greenfield housing projects to ASX-listed rival Stockland for $1.1 billion last year.
So far, it has divested about $2.2 billion worth of the $2.8 billion target it had set for this year and says it is on track to meet its 2025 financial year target.
“Completion of the UK construction sale reinforces our view that whilst Lendlease’s simplification is a drawn-out process, capital recycling to date has been executed at a reasonable pace,” Macquarie analysts told their clients in a note on Tuesday.
“Lendlease continues to explore further opportunities to accelerate the release of capital through JVs, land sales and capital partnering.”
