Lendlease is developing a “residential-for-rental” asset class to offer for co-investment with capital partners in the US and UK.
Addressing analysts and investors at the Sydney-based group’s first half results, ending 31 December 2016, chief executive Steve McCann today said: “Residential-for-rent provides exposure to a new asset class for us.“
McCann said that the US will be the first region that such an investment asset would be offered to capital partners.
“We have more than 700 apartments, or multifamily units as they are known in the US, in delivery, and we will introduce capital partners at an appropriate time,” said McCann.
The projects under construction for residential-for-rental are in Boston, New York, and Chicago.
Among them are 452 units in the Lendlease Riverline project in Chicago and 284 units at Clippership project in Boston, due for completion in 2018 and 2019 respectively.
“We also see the opportunity to introduce residential-for-rent products in London,” he said.
Lendlease has been recommended as preferred bidder for an estimated £2bn (€2.3bn) mixed-use urbanisation project in Haringey, London.
The firm has invested in urban regeneration projects in the UK, including a project at Elephant & Castle in south London and International Quarters in the city’s Stratford district.
McCann said globally the group has had residential presales totalling AUD5.7bn (€4.1bn), or 8,864 units.
Lendlease has a residential pipeline of almost 20,000 residential units across its projects in Australia, Asia, the UK, Europe, and the US, with an end value of AUD15.8bn.
When asked if Haringey had been selected for the residential-for-rental product in the UK, a company source told IPE Real Estate: “Haringey is one example – we will look at other opportunities”.
McCann said urbanisation projects provide an investment platform for Lendlease and its capital partners.
“It is no coincidence that the growth of our funds under management is parallel to [the growth] of our urbanisation programme.
“We have 150 institutional investors, including some of the world’s largest sovereign wealth funds and pension funds.”
As of 31 December, it had AUD24.7bn in FUM – up 12% on the prior corresponding period, with around AUD3bn of additional secured funds across the group’s urbanisation programme.
“We currently have 13 commercial buildings in delivery with an end value of AUD7bn – these will provide future secured funds under management of over AUD3bn,” said McCann.
He said the group secured AUD800m in new equity in its first half – most of that for co-investment in its new Circular Quay Tower projects in Sydney.
In December, Lendlease announced that it had secured the Chinese insurer Ping An and Japan’s Mitsubishi Estate as co-investors in the AUD1.5bn project.
Lendlease will also seek capital partners for retirement villages over the medium term, McCann said. Its retirement living portfolio of 71 villages is valued at AUD1.7bn.
Of the group’s AUD49bn project pipeline, AUD34.1bn is made up of residential, community, and retirement living, with the balance in commercial buildings.
Lendlease reported after-tax profit of AUD394.8m – up 12% on the previous corresponding period.