Lendlease, and its capital partners, have committed over $5.3 billion to what the global group’s Australian chief executive, Dale Connor, calls the “repair” of Sydney’s Circular Quay.
The projects – the completed Salesforce tower, the now emerging One Circular Quay apartments, the coming Waldorf Astoria Hotel, and the public spaces in between – are both a nod to Lendlease’s past and a pointer to its future.
“These are the times when opportunities present themselves for Lendlease and their capital partners,” Connor said when we met on site last week.
“It’s hard yards in property at the moment. But property is cyclical, and I want to be ready when it happens.”
Of course, others have made, and will continue to make, big contributions to the repair of Circular Quay, including the City of Sydney, AMP, Dexus, Mirvac, and Transport for NSW.
At the eastern end of the precinct is the $3 billion Quay Quarter redevelopment, opened last year, and being followed by the full refurbishment of the iconic 33 Alfred Street tower.
Commenced by AMP Capital, the precinct is now managed by Dexus and owned by the Dexus Wholesale Property Fund, the Mirvac Wholesale Office Fund and, in part, by Rest Super.
For Lendlease, the developments at the Quay showcase a number of elements that will mark its future: a continuing focus on the workplace, on place-making, on working with governments, and most importantly, working with partners.
Lendlease’s global chief executive, Tony Lombardo, wants his group to become “an investments-led business”, aiming to grow funds under management by 40 per cent, to $70 billion, by June 2026, and deliver results with a higher proportion of recurring and annuity earnings.
Much of that growth is expected from Australia, where the group already has $33 billion in funds under management, but where many of its rivals also aim to boost their fund management portfolios.
Connor says the investment-led focus, gives “strong purpose” to Lendlease’s broader activities.
“We have strengthened our connections to international capital in the past five years,” he says. “And we have the ability to create product; not only from scratch but also to step in and add value to existing assets.”
Mitsubishi Estate Asia partnered with Lendlease on the development of the Waldorf Astoria – now presold to the Forrest family’s Tattarang private investment company for about $520 million – and on the One Circular Quay apartments.
Mitsubishi Estate also took a 30 per cent stake in the Salesforce Tower and its surrounds, known collectively as Sydney Place, alongside the Lendlease-managed APPF Commercial, which has a 20 per cent stake, and Ping An Real Estate, which holds a 30 per cent stake but has attempted, unsuccessfully, to sell out.
The Salesforce tower, the tallest office building in the Sydney CBD, is the latest Lendlease project to change both the city’s skyline and streetscape – a heritage that stretches back to the 1950s and includes more than 25 skyscrapers such as Australia Square, the MLC Centre, and Darling Park.
Connor says office buildings, which are such a big component of the Lendlease development and funds management books, will continue to be a focus for the group despite the present negativity towards the sector.
The workforce needs a workplace, he says. “[But] it has to have a sense of place and purpose.” Salesforce shows a sense of place with “the best ground plane you can have in a single tower”.
At its base are the new Ah Tong and Sai Ying lanes – the names reflect the amount of Chinese porcelain discovered on site – and which are now crowded with lunchtime patrons for high-quality Asian fast food.
Connor, a 35-year Lendlease veteran, notes that his group led the way on place-making, with pedestrian plazas at Australia Square and the MLC Centre, and that its new project, Victoria Cross over the Metro station in North Sydney, “will be even better”.
He is also a strong believer in the strength of office demand at the northern end of the CBD, on the rise behind Circular Quay.
“The Metro [to open next year] will transform this side of the city,” he says. “I don’t think Sydney yet understands what the Metro will provide in terms of connectivity.”
Salesforce Tower is 90 per cent leased, although, as office demand has contracted, a number of floors are back on the market for sublease.
The repair of this part of Circular Quay really started back in 2009, when the City of Sydney wrote new planning controls for the block bounded by Alfred, Pitt, Dalley and George streets (APDG).
Lord Mayor Clover Moore says the block had the worst of 1960s development with “very ordinary buildings”, car park driveways and no space for pedestrians.
“Carefully crafted principles and planning controls were developed that encouraged development with additional height [but not floor space], incentivised land amalgamation, while delivering a new public space and laneway network,” she says.
The City then worked the vision on a case-by-case basis with the owners, Blackstone, Poly, Mirvac, and Lendlease, which in 2014 had acquired a key site from Westpac.
“The City could see the potential in demolishing the Westpac building for a new public square on George Street and reconfiguring the APDG principles for better public space and pedestrian connections,” Moore says.
The principles paved the way for the tower, the new laneways, and community benefits secured through planning agreements such as three office floors for the technology and climate change sectors, the first publicly dedicated plaza in more than 50 years, a public end of trip facility, a new community building and public art canopy.
The City of Sydney’s chief planner, Graham Jahn, says that buildings, and precincts like those at the APDG block, “will help boost interest and investment in the city”, with space for big global corporations and opportunities for small business at ground level.
Lendlease will do a lot more work with governments, from huge defence projects to social housing.
Lendlease Construction and its partners, BESIX Watpac and Capella Capital, are now working with Transport NSW on the Circular Quay Renewal project.
Now at the planning and design stage, the project aims to bring the dated wharves and railway station into the 21st century with a widened harbour front promenade, an enhanced elevated walkway, better retail and dining, upgraded green spaces and a connection to country.
“Governments are looking to help solve the housing crisis, to increase the density of housing, and get value out of their transport investments,” says Connor.
“We are well placed to help.”
Robert Harley is a former Financial Review property editor. He can be contacted at email@example.com
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