April 30 (Bloomberg) -- Lend Lease Group, Australia’s biggest listed property developer, will start building the third office tower at its A$6 billion ($5.6 billion) Sydney harbor-front development after signing PricewaterhouseCoopers LLP and HSBC Holdings Plc as tenants.
PwC’s Australian unit agreed to occupy 26,500 square meters (285,243 square feet) over 12 floors in the 49-story building at the Barangaroo project, and HSBC’s local business has signed to take up 8,000 square meters, Sydney-based Lend Lease said in a regulatory filing. The developer also sold a 10 percent stake in the site’s first two office towers to Netherlands’s APG Algemene Pensioen Groep NV, reducing its interest to A$300 million, or 15 percent, from A$500 million earlier, it said.
Lend Lease began work on the development in late 2011, creating a new financial hub in Australia’s most populous city. The agreement announced today will allow the company to begin construction on the last office building on the site, which it will fund entirely with existing capital, it said today, without providing further details.
“Lend Lease’s current balance sheet position provides the group with capacity” to fund the tower itself, Anthony Passe-de Silva, a Sydney-based analyst at JPMorgan Chase & Co., who has an overweight rating on the stock, wrote in a client note today. “Lend Lease is progressing development of Tower 1 sooner than it did with Towers 2 and 3 in light of the lower level of tenancy secured. This presents risks for Lend Lease in terms of filling the remaining space in the three towers.”
The developer’s shares rose 0.9 percent to A$12.95 at the close of trading in Sydney, extending gains this year to 16 percent. The benchmark S&P/ASX 200 Index has advanced 2.6 percent this year.
HSBC plans to move into the tower in late 2016, the bank said in a separate release.
“We are committed to growing our presence here, and this move to Australia’s newest financial hub reinforces our commitment,” Tony Cripps, chief executive officer of HSBC Australia, said in the statement.
Lend Lease in 2012 said it had secured A$1 billion from the Canada Pension Plan Investment Board, A$500 million from the developer’s unlisted fund and pension funds Telstra Super and First State Super. Tenants including Westpac Banking Corp., KPMG LLP, law firm Gilbert+Tobin and Lend Lease itself have leased 77 percent of the first two towers, according to the Barangaroo South website.
“This is a long roll-out situation, but it adds to the positive impact that Barangaroo is going to have on Lend Lease,” Winston Sammut, managing director of Sydney-based Maxim Asset Management, said by telephone.
The 22-hectare (54.4-acre) site will contain 280,000 square meters of commercial floor space, according to its website.
“Prior to today’s announcement, we were already ahead of where we expected to be at this stage of the evolution of the Barangaroo South precinct,” Lend Lease CEO Steve McCann said in the statement. “We are confident that International Towers Sydney will continue to attract quality tenants.”
The company will add other investors “at an appropriate time in the future,” according to the statement.
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