Lend Lease Gets Funding for First Sydney Harbor Towers
Lend Lease Group, Australia’s biggest property developer, secured A$2 billion ($2 billion) in commitments to develop the first two towers at its Barangaroo South site, including investments from retirement plans and its own property fund.
Canada Pension Plan Investment Board, which invests for the country’s state retirement plans, will invest A$1 billion. Another A$500 million will come from Lend Lease’s Australian Prime Property Fund Commercial, Telstra Super, a retirement fund for Australia’s largest phone company, and First State Super, an independent pension fund. Lend Lease will invest as much as A$500 million, it said.
“This is terrific news,” New South Wales state premier Barry O’Farrell said by e-mail. Settling the funding “during challenging economic times with constrained real estate investment and financing is no mean feat,” he said, adding that the project would create 10,150 jobs.
Lend Lease, which began work on the A$6 billion redevelopment project late last year, plans to create a new financial hub for Sydney on a former dockyard on the city’s harbor adjacent to its main business district. The 22-hectare site will contain 300,000 square meters (3.2 million square feet) of commercial floor space, according to its website. The developer signed tenancy agreements on June 22 with Westpac Banking Corp. (WBC) and KPMG LLP to lease 71 percent of space in the two towers, and said Lend Lease itself will also move into the second tower.
Westpac and KPMG will move into the new buildings between mid-2015 and early 2016, they said.
Lend Lease shares have climbed 4.3 percent so far this year, closing at A$7.47 on July 6, compared with a 2.5 percent gain in the benchmark S&P/ASX 200 index.
“This investment supports our real estate strategy to acquire premium, long-term assets in key global markets,” Graeme Eadie, senior vice-president for real estate investments at the Canadian pension fund, said in an e-mailed statement.
The site plans include a park with 675 trees on the shores of Sydney harbor, offices, a ferry terminal and a hotel as well as outdoor areas for public events.
Crown Ltd. (CWN), the casino company controlled by billionaire James Packer, has expressed interest in including gaming facilities at the hotel, Steve McCann, Lend Lease’s chief executive officer, told Australian Broadcasting Corp. television yesterday .
“If you look at Crown’s facilities elsewhere in Australia and overseas they’re very high quality,” McCann said. “I’ve no doubt they’d be a competitive proposition.”
While Packer has said he’d like to make the site a venue for high-rolling gambling, he is constrained by a state casino monopoly held by Echo Entertainment Ltd. until 2019.
Crown holds about 10 percent of Echo and has said it would like permission from regulators to raise that stake to 25 percent, a level that would trigger a takeover bid of the A$3.4 billion company under Australian corporate laws.
Barangaroo’s planned office space will add about 6 percent to the local market, which totaled 4.9 million square meters last Sept. 30 according to consultants Preston Rowe Paterson.
Sydney’s central business district saw its vacancy rate increase to 9.6 percent in January from 9.3 percent in July 2011 as more than 80,000 square meters of new space was added to the market amid slower take-up, property broker Colliers International said in a report on the industry’s performance in the first half.
The funding discussions had been in progress for some time and the agreement didn’t necessarily show more confidence in the economy, McCann said yesterday.
“I’m not sure that it of itself indicates the market’s loosening up,” he said, adding that Australia’s economy remains “challenging,” particularly in the construction and the residential areas.
Conditions in Europe are “very difficult” outside of London’s residential market, McCann said. While “activity levels are quite strong” in the biggest U.S. cities such as New York and Chicago, other cities in the country were “a fair way away,” he said.
A further cut in Australia’s interest rates “would help everybody,” he said. “We’re still well down on previous years, so I think the market still needs a bit of help.”
To contact the reporter on this story: David Fickling in Sydney at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Tighe at email@example.com
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.