‘The time is right’: Billionaire Lederer ramps up funds platform

Lederer’s initiative through LDR Capital followed three years of upheaval in the commercial property market when a surge in interest rates and rising bond yields – a critical metric for the sector – led to uncertain demand and put pressure on asset valuations.

While the volatility was felt across all forms of real estate – from shopping malls to housing – the hardest hit was the office market, where values for some CBD buildings tumbled 25 per cent or more. That was where Lederer planned to focus his efforts initially.

Late last year, he snapped up a $305 million Canberra public service building in a deal with ASX-listed Mirvac. Separately, Lederer has all but won a drawn-out battle for control over a $270 million ASX-listed property trust after LDR Capital struck a deal with the fund’s manager on Christmas Eve.

“I’m very confident on the commercial space. There’s been a bit of noise out there about commercial real estate, about valuations and so forth,” he said.

“I’ve got a very strong opinion – and I’m talking strong – that commercial property is not going anywhere and it has tremendous value.”

Underpinning that view was an analysis of the replacement cost of constructing a new office building, which has risen sharply amid the post-pandemic inflation spike. Those high costs have held back the business case for new office towers, crimping supply of fresh space and creating a pressure cooker environment where existing towers will become more valued as long as they can be filled with tenants.

“It’s a counter-cyclical move,” Lederer said. “The population of Australia and the major cities is growing significantly. Sydney and Melbourne are growing at quite a significant pace.

“The cost to build is significantly higher every year for the past few years than it has been in the previous year. I don’t think that [situation] is going anywhere, so that creates an opportunity. That’s what we’re playing with: opportunity.”

Until recently, Lederer’s LDR Capital went under the radar, working mostly with wholesale syndicates. The family office has also been expanding into private credit. Amid early signs of a recovery across the commercial property sector, LDR Capital is moving into a new phase with direct participation in listed markets. It will also be more aggressive targeting real estate investments, creating single asset vehicles with a value of $200 million to $400 million.

Lederer is ranked 84th on the Financial Review Rich List with a fortune just shy of $2 billion. His wealth was built through Primo, founded with his uncle Andrew and which became the country’s biggest smallgoods producer before the Lederers sold it to Brazil’s JBS for $1.45 billion in 2014.

Over that journey, Lederer has built up his own considerable commercial property portfolio, much of which he retains even after selling off a $300 million mall portfolio five years ago.

That gave Lederer 50 years of real estate investment nous which, together with his well-credentialed team, he brought to a growing property funds business. Lederer’s own family office will invest alongside each syndicate or situation.

“We have to be super aligned,” Lederer said.

“We’ve got to look after their money better than my own. Honestly. If I lose money … well, of course I don’t like losing money … but if I lose someone else’s that’s significant, that’s terrible for me and I get a very bad feeling about that. Which by the way never happened, ever.”

Lederer is confident demand is improving in the office sector and, perhaps not surprisingly, is scathing of the widespread adoption of workplace flexibility though embrace of working from home.

“Productivity in the country is the lowest in a long time – I attribute that big time to working from home,” Lederer said.

At 79 years old, the billionaire has walked the talk, with regular 12-hour days in his Sydney CBD office where, he quipped, he used the time productively.

“I come here every morning at 7am and leave at 7pm at night. I’d better do something, I don’t want to just look at the window.”

He is also a co-owner of A-League soccer team Western Sydney Wanderers, where he was reappointed chairman in December. The club is at the bottom of the ladder, but Lederer is upbeat, insisting the team is “second to none”.