Australian developer Lendlease has identified Singapore and Kuala Lumpur as the key Asian markets where it hopes to win another three to four urban rejuvenation projects over the next five years, on top of the current two projects in these countries.
This would take its development pipeline for urban rejuvenation in Asia past the A$15 billion (S$16 billion) mark, up from the current A$6 billion, said Lendlease Asia CEO Tony Lombardo.
With the Singapore government adopting a master-developer approach for some upcoming new precincts starting with the 17-ha Kampong Bugis precinct in the Kallang area, Lendlease said it is keen to secure such a project.
Lendlease is jointly developing Paya Lebar Quarter (PLQ) in Singapore, a S$3.2 billion integrated development with Abu Dhabi Investment Authority. It is also developing the Tun Razak Exchange (TRX) Lifestyle Quarter, a A$2.6 billion mixed use development in Kuala Lumpur where it has a 60 per cent stake and TRX City (formerly 1MDB RE Sdn Bhd) owns the balance.
"If we go for the next big project, we are going to bring partners along with us and a lot of our international partners in the likes of large pension funds want to be in Singapore," Mr Lombardo said.
Mr Lombardo explained that Singapore and Kuala Lumpur are key priorities for now since the group is already in these markets and understands them. The Singapore government's drive towards smart cities and sustainability in environment, transport and infrastructure are also reasons why the city-state appeals to Lendlease.
He was speaking to the Singapore media during a tour of the group's rejuvenation projects in Sydney, which included the A$2.6 billion makeover at Darling Harbour and the A$6 billion project at Barangaroo South in Sydney's CBD. Rejuvenation projects involve revitalising places that fall into disuse or underutilisation. Elsewhere, Lendlease has also brought its expertise to bear on a waterfront project in Chicago and two regeneration projects in London.
Read also: Lendlease shifts focus back to Asia
"We believe we can make a difference to other Asian cities if we have the opportunity for projects that run 10-15 years," Mr Lombardo said. "I'm excited by the fact that there are opportunities now in Singapore to become the master-developer. That gives us the opportunity to go after some larger-scale projects to leverage our skill sets - some of the things we have done internationally and bring that to Singapore."
Lendlease manages A$24.7 billion of funds and A$11.9 billion of assets globally. Its estimated end-value of development pipeline stood at A$49 billion as of end-2016, of which urban regeneration projects account for 71 per cent. In the fiscal year ended June 30, 2016, Australia contributed 57.4 per cent of total group earnings; international markets (Asia, Europe and the Americas) made up 42.6 per cent.
Lendlease group development director David Hutton noted that for urban rejuvenation projects, there is greater alignment of outcomes for the city, environment, and the society with economic outcomes. Returns for such projects can also be higher than traditional mixed-use projects simply because people are willing to pay a premium for higher quality spaces.
In Barangaroo South where the former container wharf is being transformed into new waterfront business district, the group is building a six-storey International House Sydney made from engineered wood - Cross-Laminated Timber (CLT) and Glulam (glue laminated timber) - marking its foray into CLT buildings in Sydney. Lendlease was also appointed to undertake remediation of the site and to build the Barangaroo Reserve park.
Such large projects enable the group to create buildings and space that is aligned with government policies and its broader vision, Mr Lombardo said. But it does take time for people to understand how much a regeneration area can be worth.
He recalled how office occupiers had their qualms 10 years ago about moving to Barangaroo South as they could not envisage the future connectivity to the subway and having a new ferry terminal at the doorstep.
To date, some 13,000 office workers have moved into the three office towers in Barangaroo South and 50 retailers are open. On completion by 2022, there will be over 80 retail outlets.
Similarly, when Lendlease was developing suburban mall Jem in Singapore's Jurong East, there was scepticism towards the location. The mall was completed in 2013. "Being first means you can create more value long-term if you are going to be the owner, the operator and the manager of the asset," Mr Lombardo said. The returns are higher for frontrunners than followers, he added.
But one area of expertise where Lendlease still finds it hard to export to Singapore at this point is in senior-living. Unlike in Australia where the government sells land designated for retirement villages, Singapore does not have a separate zoning for retirement use.
Singapore's strong residential market makes it untenable for developers to build anything else on residential sites apart from high-rise condominiums to yield maximum returns, Mr Hutton said. Retirement homes are typically 70 per cent of the cost of conventional homes.
This is why Lendlease is turning its eyes to China as the first Asian market to launch such offerings, though Mr Lombardo said the group is not focused on any one city in the vast country at the moment.
China's demographics is one major draw - its elderly population is expected to grow to more than 400 million and account for more than 30 per cent of its total population by 2050. The country is looking for a right model for senior living.
"We are already in discussion with relevant parties to explore opportunities for senior living products in markets with the appropriate demographic, such as in China," Mr Lombardo said. "We can potentially work with local partners."
Lendlease is the largest senior-living owner and operator in Australia with 71 communities and over 12,000 dwelling units. It also has 57 projects in the US.
To unlock capital for redeployment, it is looking for a capital backer to take a half stake in its A$2 billion operational portfolio. Blackstone is believed to be among potential bidders for the stake.
Mr Lombardo explained that there are a number of sites with development opportunities to build adjacent age-care facilities and others have significant room for redevelopment. "What we are looking to do now is to bring in a partner to joint venture with to build the business to the next level."
This article was first published on March 30, 2017.
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