Barangaroo South construction set to begin as Lend Lease raises $2 billion

Barangaroo South construction set to begin as Lend Lease raises $2 billion
Barangaroo South construction set to begin as Lend Lease raises $2 billion

Construction of two commercial towers at Barangaroo will now commence after Lend Lease received commitments totalling $2 billion from cornerstone investors on the Sydney Harbour project.

The funding forms part of a new commercial wholesale open-ended property trust, which Lend Lease will manage.

Each tower will take about three years to build, and Lend Lease anticipates net facing rents of about $1,000 per square metre on average with a 20% incentive.

Actual rents will vary dependent on factors such as location in the building and lease term, and there will be no rental guarantees.

Construction of the perimeter wall has now been completed.

The developer has raised $1 billion from Canada Pension Plan Investment Board (CPPIB) and a combined $500 million from the Lend Lease-managed Australian Prime Property Fund Commercial (APPF Commercial) and two existing APPF Commercial investors, First State Super and Telstra Super.

Alongside these investments, Lend Lease will invest up to 25% or $500 million in the first two towers to be progressively drawn down over the development period.

The announcement of the funding follows soon after Lend Lease announced on June 22 that it had secured tenants for the first two commercial towers, with Westpac agreeing to lease around 70% of the commercial floor space in the first tower to be commenced and KPMG and Lend Lease to occupy 75% of the second tower.

Discussions with other tenants on the third proposed tower will progress over next 12 months, and depending on the outcome of these discussions, it could be launched over this time frame.

Speaking to investors today Lend Lease CEO Steve McCann described the funding as a “very significant milestone”.

“The original assessment was for one tower in first phase. We are very pleased to have funding and leasing agreements for two towers.

“Now all we have to do is build it,” says McCann.

“Investors should have complete confidence in us, since we have built 30% of the Sydney skyline,” he says. 

McCann says investors have also expressed interest in investing in the third commercial tower proposed for the site. 

McCann says that having raised the funding and secured tenants, the developer can now turn to the residential component of Barangaroo South.

“We anticipate there will be probably be residential pre-sales in the next two years,” he says.

Hotel discussions with the NSW government are expected to be finalised in the next quarter.

“We are not in a hurry on the hotel development. We first have finalise where it will be located,” McCann says. 

“We are in discussion with a number of commercial operators about the hotel.”

Lend Lease has about $20 billion in urban regeneration projects on its books including Barangaroo , the RNA showgrounds in Brisbane, the Waterbank project in Perth and projects in London.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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