Lendlease calls in Reinforcements

Morning. ☕

It’s been a tough week over at Lendlease. The company is under pressure from shareholders to demerge its international business and has engaged advisors Morgan Stanley, Gresham and Macquarie in the process.

Mirvac sold 50% of 255 George Street at a 6% yield and a 17% discount to book value, setting somewhat of a benchmark for office transactions moving forward.

Construction isn’t getting any easier, with ASIC data showing builder insolvencies have inceased +32% compared to this time last year. Apartment approvals are also down to their lowest level in 11 years.

Let’s get into it 👇

Mergers, Acquisitions & Private Equity

Dexus seeking A$1B for opportunistic fund

• Dexus Real Estate Partnership 2 is looking to raise $600 million to $1 billion to invest in opportunistic equity and debt.

• The fund aims for a 15% net equity IRR and focuses primarily on Sydney and Melbourne. (AFR)

Lendlease calls in Morgan Stanley, Gresham & Macquarie

• Lendlease has appointed Morgan Stanley, Gresham, and Macquarie to explore potential structural changes amid pressure from major shareholders to carve off its international division

• This follows a detailed, public seven-page proposal from Tanarra which suggested it abandon its existing strategy and exit all of its international construction efforts. (The Australian)

Hedgefund Caledonia makes bet on US proptech Zillow

• Australian hedgefund Caledonia has made a A$9B investment in Zillow, betting its market capitalisation of US$10.8B (A$16.6B) will 3x within the next year.

• In contrast, Spruce Point Capital Management anticipates up to a 60% drop in Zillow’s share price, highlighting concerns over business model maturity and recent share price declines of nearly 20%. (AFR)

WeWork nearing bankruptcy exit after saving A$12B in rent

• In an effort to prevent bankruptcy, WeWork is expecting to save over A$12B by reducing its real estate portfolio, exiting or renegotiating leases for about 300 of its locations.

• This move comes amid ongoing restructuring efforts and a buyback attempt by co-founder Adam Neumann. (Reuters)

Economics & Data

NAB Data shows VIC property investment fell 5.1%

• Property investment in VIC declined by 5.1% in 2023, while advertised rents rose by 11%, highlighting the state's tightening housing market amid increasing demand.

• The Victorian Government’s taxation policies, extracting an additional $4.7 billion over four years, have been criticized for driving investment away and contributing to the housing affordability crisis. (AFR)

ASIC Data shows builder insolvencies up 32%

• According to recent ASIC data, there have been 1,913 insolvencies in the construction sector this financial year, a 32% increase from the previous year's count of 1,447 at the same time.

• Master Builders Australia CEO Denita Wawn described the industry as facing "significant difficulties" including supply chain issues, fixed price contracts, and labor shortages. (AFR)

Apartment approvals hit 11-year low

• Apartment approvals across Australia fell nearly 25% in Feb, driving the annual approval rate to an 11-year low. The value of total buildings approved dropped by 16.5%. (Urban Developer)

Policy

NSW Government Boosts Infrastructure Funding for 135K Homes

• The NSW Government has boosted infrastructure funding to facilitate the construction of 135K new homes across 12 local government areas with A$62.5M in infrastructure projects committted. (APJ)

Zoning Reforms Proposed to Combat Population Decline

• NSW Planning Minister Paul Scully is pushing for zoning reforms in Sydney to counteract the city's declining population, particularly among 30- to 40-year-olds, due to high housing costs and restrictive planning regulations.

• The proposed changes aim to facilitate high-density housing development, especially around transport hubs, to prevent the exodus and sustain Sydney's global city status. (AFR)

BTR investor Greystar advocates for tax and planning reform

• Greystar is pushing for "reduction and clarification of withholding tax rates to attract foreign investment," highlighting a the wider industry call necessity for streamlined planning processes across various government levels. (AFR)

Four key Melbourne suburbs haven’t built a major project in five years

• The Victorian Government has unveiled plans to increase housing in 10 Melbourne centres by up to 60,000 homes.

• However, 4 out of 10 suburbs targeted by these plans haven't seen major apartment projects in the past five years. (AFR)

Capital Flows

Private investors moving into Large Format Retail

• Private investors currently hold c. 66% of the large format retail (LFR) investment market.

• LFR assets recorded a 79% drop in transaction volume in 2023, with larger private buyers accounting for 66% of transactions, compared to just 36% in 2020. (APJ)

Deals and Projects (A$25M+)

BTR, Co-Living and Student Accommodation

• Greystar has completed a c. 700 unit, A$500M BTR project in South Melbourne. (Real Commercial)

• Cedar Pacific and Sumitomo Forestry have partnered to develop a A$1.2B sustainable build-to-rent (BtR) portfolio in Australia and New Zealand, starting with a 475-apartment tower in Brisbane. (Urban Developer)

Residential

• Gurner has updated plans for an A$800M dual-tower project at 189 Kent Street in Sydney, reducing apartments from 125 to 91. (Urban Developer)

• BEG Projects has proposed a 3-building development in VIC, featuring 444 apartments and townhouses with an estimated development cost of A$105M. (Urban Developer)

• Meriton is planning to expand its development in Carlingford, Sydney, by adding c. 200 apartments and increasing building heights from 33m to 110m. (Urban Developer)

Retail

• Harvest Hotels has purchased the Jerrabomberra Hotel for between $24 million and $27 million. (AFR)

• Woolworths' development arm, Fabcot, has received preliminary approval for project in Rose Bay, Sydney. The project includes a four-storey shoptop and luxury apartments above a small-format Woolworths store. The sites were acquired for A$27.4M. (Urban Developer)

• Charter Hall has off-market sold Mackay's Sydney Street Markets to Augustine Property for A$43.5M, slightly below its book value. (RE Source)

Office

• Cbus Property is constructing a 60,000 sqm office tower in Melbourne valued at c. A$1B. The project is 30% pre-leased to Commonwealth Bank and Baker McKenzie. (AFR)

• Mirvac sold a 50% stake in its 255 George Street Sydney tower for $364 million, a 17% discount from its peak value, to Keppel REIT. The building was sold at a 6% yield. (AFR)

• Dexus’s Atlassian Central has reached a significant construction milestone with the completion of the reinforced concrete core. Atlassian holds c. 35% of the project and will be the anchor tenant on a 15-year lease. (AFR)

• Matter House has filed plans for a self-powered 13-storey office tower in VIC, designed to be a net producer of energy and a net importer of organic waste. (Urban Developer)

• ISPT has received approval from the Brisbane City Council to construct a 42-storey mixed-use commercial tower at the site of the former Regent Theatre in Brisbane CBD. (Urban Developer)

Industrial

• ISPT is planning a project in Kemps Creek, Sydney, with 8 warehouses across a GFA of 244,413sqm. Construction costs are estimated at A$323M. (Urban Developer)

• Greystar is developing a deluxe warehouse in Granville, Sydney, covering a GFA of 31,000 square meters across multiple levels. The capital investment value for this project is estimated at A$189 million. (Urban Developer)

Hotels

• The 13-storey Crystalbrook Sam hotel in Adelaide's CBD has received planning approval. The hotel will feature 175 rooms and is designed by PACT Architects. (Urban Developer)

Alternatives

• Walker Corporation has secured The LUME as a tenants at its A$3B Collins Square project. The LUME is the the world's largest digital art gallery. It will contains 3000 square metres over four floors. (RE Source)

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