Australian property and infrastructure group Lendlease has joined forces with Canada’s pension investment manager PSP Investments to own and develop a massive urban regeneration project in Milan.
Lendlease, which first agreed to re-launch the project in 2017 following prolonged financial troubles by its original sponsor, local developer Risanamento, said that the 110-hectare development site to the southeast of Milan has the potential for up to 2,500 homes alongside a new commercial office, retail and entertainment district as well as facilities for over 1,500 students, new schools and a museum. The project has a total gross development value of €2.5 bn.
Known as Milano Santa Giulia, the development has been in the works for years, with Risanamento first looking for a financial partner to develop the capital-intensive site then looking for a sale to retrieve cash. Risanamento, which is largely owned by creditor banks Intesa and Unicredit, signed a binding agreement with Lendlease in 2017 to relaunch the development of the site, situated only a 10-minute drive from Milano Linate international airport and 15 minutes from the city centre.
Lendlease and PSP said in a statement that the development will be designed with sustainable principles including a zero-carbon target and WELL building standard certification. There will be c.30 hectares of parkland, which will become the third largest urban park in Milan. Milan’s largest multi-function indoor arena, with capacity for 16,000 spectators, will be built to the north of the site and be used as a venue during the Milano Cortina 2026 Winter Olympics.
Office buildings
The new partnership will make an initial investment of €250 mln to acquire two premium grade office buildings, Spark 1 and Spark 2, that are being developed on the southern tip of the site and are substantially pre-let. Lendlease will develop and manage the buildings and ownership will be split equally between the two partners.
The partnership also intends to carry out development across the north of the site including the residential, office and retail components through a 50:50 joint venture. Over the next decade, the master planning, design and development of the scheme will be led by Lendlease.
The project adds to Lendlease’s commitment three years ago to another development operation in Milan, the 1.2 million m2 regeneration of the Expo 2015 area following the universal exposition held by the city three years ago. The project encompasses a new Statale di Milano university building, student housing facilities, a hospital and a vast range of commercial spaces.
Tom Mackellar, chief financial officer for Lendlease Europe, said: ‘We are very pleased to be partnering for the first time with PSP Investments. This joint venture demonstrates the value of the integrated model we work with and how our world-class urbanisation skills provide major capital partners with access to high-quality and diverse investment products on a global scale. Our strategy is to work with like-minded capital partners across our £26 bn pipeline of urbanisation projects across the UK and Europe. These types of partnerships allow us to progress landmark schemes and we look forward to developing our relationship further as the project progresses.’
Andrea Ruckstuhl, head of Continental Europe for Lendlease, said: ‘This project will unlock a major piece of land in Milan and we are very pleased to be providing PSP Investments, an investor with an outstanding track record in investing in city defining projects, with the opportunity to join us in developing this innovative new scheme. This partnership increases our momentum on the project and only strengthens our long-term commitment to a city where we are also responsible for the Mind project that is taking shape on the former Milan Expo site.’
Stephane Jalbert, managing director, real estate investments, Europe and Asia Pacific, PSP Investments, said: ‘We believe Milano Santa Giulia presents an exciting opportunity to create a vibrant new neighbourhood for Milan, built around the principles of innovation and sustainability, and we look forward to working with our new partners Lendlease on this project.’
