Global property group Lendlease has “paused” construction on an A$1.9bn (€1.1bn) office and condominium complex in San Francisco, its single largest investment in the US, as it seeks to de-risk the project.
Known as Hayes Point, the project in central San Francisco has a 47-storey office tower and a residential component with more than 330 condos. Site preparation had begun when it broke ground early this year.
In a media call after announcing the group’s full-year results, chief executive Tony Lombardo said Lendlease had always planned to de-risk the project by securing an office tenant or bringing in third-party capital.
“When we gave the team the go-ahead we always said we would reassess the project once it gets to a point where we have finished the base work,” he said.
“We have got A$260m currently invested in the project. It was a decision over the last couple of months to pause, but [we’re] really making sure we de-risk it appropriately before we’re prepared to put further capital in.”
Lendlease made an after-tax loss of A$232m in the year to June, dragged down by a 7% devaluation of its assets. The value of its office holdings dropped by 9%. It also took a one-off A$295m provision to cover building defect liability claims in the UK.
Lombardo said the group was continuing to sell assets and was in talks with various groups about selling its ‘master-planned communities’ business, valued at A$1bn – either the entire business or a stake.
Australian-lised Stockland Group and Japan’s Daiwa House, which is already a partner in Lendlease’s build-to-rent project in Melbourne, have been named as potential bidders in media reports. Lombardo declined to comment on negotiations but said he expected to close a deal in the current financial year.
Lendlease is also progressing on the sale of its retirement businesses in Australia and China.
Funds under management at Lendlease grew by 9% to A$48.3bn in the year to June. Lombardo said Lendlease was on track to become have A$70bn in funds under management by 2026.