Lendlease’s Singapore investments will double to $25b: Lombardo

“Singapore is a market we understand well,” Lombardo told The Australian Financial Review in an interview in the South-East Asian country last week.

“I’d like to see us grow our funds here to $20 [billion]-$25 billion over the next five years.”

He brushed off a question about whether Singapore would gain importance to a restructured Lendlease – forced by investors last year to divest itself of international construction and focus on a more profitable Australian market – if it lost the rights to manage $10.6 billion worth of assets across three pooled Australian Prime Property Fund investment funds.

“Everything we do is important.”

Lombardo on Wednesday faces a second attempt by investors to replace it as manager of the APPF Industrial fund with rival Mirvac, after a meeting called for last week failed to draw a quorum of investors to vote on the resolution proposed by industry super funds Hostplus and UniSuper.

While this week marks the second – and final – attempt allowed to the investors in the industrial fund to change managers, that is not the only one Lendlease stands to lose.

Investors have been called to a separate meeting next week to vote on kicking it out as manager of the $2.8 billion APPF Retail fund. Ratings agency S&P Global Ratings on Friday said the fund was at risk of a downgrade from the planned sale of Erina Fair shopping centre in NSW’s Central Coast – cutting it to four assets – that would reduce scale and diversity.

Lendlease’s $12 billion in assets in Singapore sit in different structures, including the $S1.52 billion ($1.8 billion) Singapore-listed Lendlease Global Commercial REIT and partnerships, such as its 50 per cent stake in the Vita Growth Partners life sciences joint venture with US private equity firm Warburg Pincus.

The company is currently developing two new office developments – a two-tower head office complex for blue-chip client Singtel and the 33-storey Shaw Tower – which will add a further $5 billion to the company’s funds under management, Lombardo said.

The company was also in discussions with landowners of two more sites about potential developments, he said.

“They’re two very key sites that may help unlock another site,” Lombardo said.

“So we’re working at the moment with the existing owners around designs and what we think we can do to unlock more value through those sites.”

But in Singapore – as in Australia – Lendlease has capital partners wanting to exit.

The Abu Dhabi Investment Authority (ADIA), a long-term partner in Lendlease’s O’Connell Street precinct – a 6737-square-metre site in central Sydney with a planned 72-storey, 309-metre tower – wants to exit that investment.

The sovereign wealth fund also wants to sell its 70 per cent stake in Paya Lebar Quarter, the precinct of three office towers and one retail centre that houses Lendlease’s own Singapore office. Lendlease owns the remaining 30 per cent.

“ADIA’s changed tack a little bit around their strategy,” Lombardo said.

With the O’Connell project going through council planning processes, now was a good time for ADIA to sell, he said.

“They didn’t want to put the future capital up for development. And there’s a number of interested parties. We think that will make a great location for further development.”

ADIA, like many investors do, changed its investment strategies – in this case from holding to selling assets – and Lendlease was now working with ADIA to sell the shopping centre adjacent to Singapore’s MRT Paya Lebar rail station, Lombardo said.

While the sovereign wealth fund also wanted to sell the three office towers, at a time of falling interest rates, Lendlease was encouraging ADIA to wait until the office market had recovered, he said.

“What we’ve said to them is we believe there’s value in the office to continue to hold because we’re seeing positive rental reversion that in the last 12 months alone, the office rental reversions have been 10 per cent-plus here, and there are low incentives. So that’s adding value to the future of the assets.”

Lendlease’s long relationship with Singapore

Lombardo, who lived in Singapore for five years as the company’s regional head before taking over as chief executive in 2021, said the company’s long history in the country gave it a competitive advantage.

Its first project was building 5000 public housing units – the form of housing that 80 per cent of Singaporeans live in – in 1973, just eight years after the country gained independence from Britain.

“We’ve been here for over 50 years and Singapore’s just turned 60 this year,” he said. “We’ve been a big part of how Singapore has developed.”

Lendlease expanded into asset management 25 years ago with Parkway Parade, a mixed-use development with 52,555 square metres of retail and 17,412 square metres of office on Marine Parade, eight kilometres east of the city’s CBD.

Lombardo is eyeing future residential development opportunities that will come when, from 2030, the government closes the 800-hectare Paya Lebar Air Base, which served as the country’s international airport from 1955 until the opening of Changi Airport in 1981.

A photo shoot of Lombardo by the Financial Review’s photographer in the Paya Lebar public square on a weekday afternoon was frequently interrupted overhead by military jets coming in to land on the runway three kilometres away.

While most of the land will be used for public housing, there will be opportunities for privately owned housing and other commercial developments as the airbase site is developed over the 20-30 year horizon, Lombardo said.