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Lendlease strengthens investments and business ties between Japan and Australia

Performance and Leadership
  • 20 Mar 2023
Global CEO and Managing Director Tony Lombardo held talks with top executives from some of Japan’s biggest developers and banks to facilitate more Japanese capital into Australia’s property market.

Monday 20 March 2023

The Australian Financial Review
Japan targets property deals Down Under
Exclusive
Michael Smith
AFR correspondent

Edited by Trudy Harris: trudy.harris@afr.com

Tokyo | Lendlease chief executive Tony Lombardo has held talks with top executives at some of Japan’s biggest developers and banks over the past week as part of the Australian company’s strategy to direct more Japanese capital into Australia’s property market.

Speaking in Tokyo during his first visit to Japan since the start of the pandemic, Mr Lombardo said Lendlease was looking at new joint ventures with longstanding partner Mitsubishi Estate and was also talking to other major players in Japan’s property sector.

While Lendlease has had a presence in Japan for 30 years, it is one of a growing number of ASX-listed companies looking to tap into the resurgence of Japanese investment into Australia as the country reopens after the pandemic.

Australian companies are also eyeing Japan, with Goodman Group announcing last week a deal to develop a huge air cargo logistics hub at Tokyo’s Narita International Airport.

‘‘There is more appetite by the Japanese to invest in Australia,’’ Mr Lombardo told The Australian Financial Review during a three-day visit to Japan last week. ‘‘Today it has been predominately Mitsubishi Estate, but we see that growing in terms of our pool of investors.’’

Mr Lombardo, who met with new Mitsubishi Estate chairman Junichi Yoshida last week, said the company was also talking potential deals with Mitsui and Japan’s biggest home builder, Daiwa House, with which it has previously partnered in a New York project, as well as debt providers. He met with top executives at Softbank and SMBC last week.

Lendlease’s joint venture with Mitsubishi to buy One Circular Quay in Sydney was heralded as a sign that Japan deals were back after investment fell during the pandemic. Mr Lombardo would not comment on reports it would also team up with Mitsubishi on the Victoria Cross development in North Sydney.

Strengthening diplomatic ties between the two countries and Australia’s reputation as a safe and reliable place to invest has put it on the radar for a growing number of Japanese investors.

While forming relationships with Japanese companies can be notoriously time-consuming, Mr Lombardo said their Tokyo-based partners could move quickly on deals once the trust was established.

‘‘I’ve been here 26 years,’’ said Andrew Gauci, the head of Lendlease’s Japan business. ‘‘In the past 24 months there has been a push for [Japanese] boardrooms to look at Australia as a safe and consistent partner. What we have is a base here that enables us to leverage that. Anything to do with an Australian business is a good thing.’’

Mr Lombardo, the company’s former international boss who was based in Asia, said he still saw the region as a key growth platform for the company. The company’s board will meet this week in Malaysia, where a major retail development called The Exchange TRX is due for completion this year.

‘‘Asia is the growth engine for the world and so it is trying to make sure we position ourselves well in Singapore [the company’s regional headquarters],’’ he said.

Mr Lombardo has promised to deliver $8 billion in property completions by 2024 despite a challenging property market that has shareholders nervous. He is also cutting costs and looking to create more reliable recurring income under a transformation strategy.

Lendlease says its investment relationship with Japan goes both ways. It is pursuing urbanisation projects in Tokyo where demand for housing and office space that meet green energy targets is growing despite the country’s overall demographic crisis.

Tokyo has a population of about 37 million.

Lendlease’s strategy in Japan is modernising existing older properties rather than knocking them down and starting again, which creates a huge carbon footprint.

‘‘We are really starting to get the momentum in this investment-led push and that’s why we want to make Japan one of our key nodes,’’ Mr Lombardo said.

‘‘A lot of our big capital partners want to come to Tokyo and therefore there is high demand, access to product that is tightly held, and big players like Mitsubishi and Mitsui control large components of the market.’’

Lendlease also has a $US1 billion ($1.49 billion) partnership to invest in data centres across the Asia Pacific. Construction started on the first data centre in Japan’s Saitama city last year and the first phase is due to be completed in 2024.

Mr Lombardo said the company was looking at other potential locations with a second data centre expected to be built in Japan, and possibly one in Malaysia under the partnership.

In China, Lendlease is focused on its Ador Gardens senior living project in Shanghai, a pilot for future projects in a country which, like Japan, has a rapidly ageing population.

The first phase opened in 2021 and 180 residents have moved in, but Mr Lombardo said China’s COVID-19 lockdowns had made it challenging.

 

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