Aware Super backs $1bn New York project by Lendlease

The investment in a residential precinct is a major counter-cyclical play in the US property market

Lendlease and Aware Super have snapped up a site for a $1bn development in Brooklyn, New York

Two Australian companies — global development giant Lendlease and superannuation fund Aware Super — are looking to shrug off the coronavirus pandemic sweeping the US by snapping up a site for a $1bn development in New York.

The groups, which have a tight relationship locally and offshore, have bought the property in Brooklyn and are now planning a rental project with 800 apartments.

In New York, Lendlease is perhaps best known as a builder of skyscrapers but it has now forged into urban development in what is being billed as a major counter-cyclical play after it recapitalised mid-year.

The property which sports views across the New York skyline was first listed for sale in April at $US160m ($220m) but Lendlease and Aware paid about $US100m for a 90 per cent interest in the 2.6-acre site.

The pair are already working on large apartment projects in Boston and Chicago but the New York deal signals their confidence in the city’s recovery in the wake of the pandemic and is one of the largest property sales to be struck in the city this year.

Lendlease has built up a $113bn pipeline of work in global capitals, which has left it vulnerable to the impact of the pandemic as it re-emerges in Britain, and it has downsized its operation in London. The company is winning approvals for its long-dated projects in Britain and is forging ahead with two massive precincts in Milan.

In the US, it already has a huge tie up with Google where it will develop a residential and commercial neighbourhoods in the San Francisco Bay Area that have an end value of $20bn.

“The acquisition of 1 Java, Brooklyn, is another major milestone for Lendlease’s Americas business as we continue to leverage our end to end capability across all aspects of the real estate chain,” Lendlease chief executive, Americas, Denis Hickey, said.

“On the back of the $20bn partnership we signed with Google last year to jointly deliver three major urban regeneration precincts in the San Francisco Bay area, this takes our US development pipeline to over $30bn of current and future projects,” he added.

The move is also in keeping with Lendlease’s strategy to take on partners at an earlier stage in the life of its projects as it builds up its investment management division.

The project will transform a full city block into about 800 residential for rent apartments. About 30 per cent of the apartments will be designated as affordable housing.

The move extends the 2018 partnership Lendlease formed with Aware Super, formerly called First State Super, which established the $US2bn Lendlease Americas Residential Partnership to develop and hold residential for rent assets in US gateway cities.

With the latest investment, the portfolio now spans projects in Chicago, Boston and New York, with Lendlease as the partnership’s development, construction and investment manager. The project will be split with Lendlease taking a 25 per cent interest and Aware Super with 75 per cent.

Aware Super portfolio manager Alek Misev said the deal further expanded the company‘s US portfolio and built out its strategy in affordable housing, build-to-rent and serviced apartments.

Both partners emphasised that New York would come back once the pandemic passed.

“We believe everything that has always made New York a special place — its cultural activities, diversity, dining and entertainment, and most importantly the people who come to the city to make connections in their professional and personal lives — will endure beyond the COVID challenges,” Lendlease managing director of property, Jason Alderman, said.