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Lendlease in $1.4b London office deal

Michael BlebySenior reporter

Lendlease and its investment partners including NSW Treasury Corporation (TCorp) will buy an Β£809 million ($1.38 billion) blue-chip office building in the City of London that upon completion next year will be fully occupied by Deutsche Bank on a 25-year lease.

A Lendlease-managed investment vehicle acquired the 568,500-square-foot (52,815sq m) office tower above Moorgate Station from developer Landsec on an implied yield of 4.6 per cent, based on its Β£38 million annualised net rent.

Opening soon: Lendlease is part of a consortium that has paid Β£809 million for 21 Moorfields. Β 

The deal is typical of the assets Lendlease is seeking to acquire as it increases its global funds under management from $44 billion last year to the $70 billion figure it is targeting by 2026.

Announcing its results last month, the ASX-listed company said it was spending $2 billion, and had a further $9 billion committed to boost its funds under management and $64 billion in investment-grade assets in its development pipeline.

The office segment is key to that – at the end of 2021-22, this accounted for 56 per cent of Lendlease’s funds under management.

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β€œThe scale of this joint investment in the heart of London City reflects the global appetite for premium and sustainable office assets in the world’s key gateway cities,” said Neil Martin, Lendlease’s chief executive for Europe.

β€œThis significant acquisition adds size and weight to our European investments platform.”

Lendlease did not disclose the size of its own holding in 21 Moorfields, only saying it was acquiring a minority interest in the investment vehicle that includes TCorp and another undisclosed investor, thought to be an existing investment partner of Lendlease.

TCorp, the NSW government’s central borrowing authority and a fund manager with $101 billion worth of assets under management, appointed Lendlease in 2020 to manage its $1.5 billion-plus direct property portfolio.

Chief investment officer Stewart Brentnall said the deal was TCorp’s first direct investment in the London office market and second in the UK after acquiring a logistics asset earlier this year.

β€œTCorp has been actively pursuing direct property investment opportunities across Europe and is pleased to expand its relationship with Lendlease by partnering in the landmark 21 Moorfields opportunity,” Mr Brentnall said.

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β€œThis strategic initiative contributes return, diversity and sustainability to our global real estate exposures.”

Developer Landsec, which will oversee the completion of the development, said the sale price represented a 9 per cent discount to the building’s March 2022 value but would still result in a development profit of Β£145 million – a 25 per cent profit on cost.

The transaction will be completed in the coming week, the parties said and Lendlease will manage the investment vehicle acquiring the asset.

Lendlease also has a strategy of expanding through urban regeneration projects it seeks to win in major cities around the world, but they can be harder to get over the line than the office tower for Deutsche Bank.

Last month, Lendlease secured planning approval from Haringey Council for a flagship Β£1.3 billion development in north London after a five-year slog.

The High Road West regeneration scheme, one of nine major projects in Lendlease’s $51 billion European pipeline, has battled opposition from the local community and even top-flight soccer club Tottenham Hotspur, will redevelop an 11-hectare area including 300 existing homes and a clutch of industrial estates into a new mixed residential-commercial neighbourhood with 2500 homes.

Michael Bleby covers commercial and residential property, with a focus on housing and finance, construction, design & architecture. He also dabbles in the business of sport. Michael is based in Melbourne. Connect with Michael on Twitter. Email Michael at [email protected]

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  • Commercial real estate
  • Property development
  • Lendlease
  • UK
  • Property investment
  • Office

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