Dive Brief:
- Lendlease’s rough 2023 continues. The Australia-based builder and developer hit pause on Hayes Point, a $1.2 billion, 47-story mixed-use tower in in San Francisco, CEO Tony Lombardo told investors during an earnings call Monday.
- The project, originally set for completion in 2026, is the company’s largest investment in the U.S., according to Reuters. If finished, the project will hold 300 condos and over 300,000 square feet of office space, according to the San Francisco Business Times.
- The stall follows Lendlease laying off about 10% of its global staff — or about 740 workers — in mid-July. At the time of layoffs, an official statement from Lombardo claimed the worker reduction wouldn’t impact project delivery dates.
Dive Insight:
In its rocky earnings report released Monday, Lendlease announced an AU$232 million statutory loss ($150 million USD). Nonetheless, the company claimed its financial position was stable in its 2023 annual report, with AU$22.9 billion of work in progress and AU$8.7 billion in external construction backlog revenue. The latter represented a 17% drop from its full-year 2022 results.
Lombardo addressed Hayes Point in the earnings call, stating the project was paused to “de-risk” the investment, which has cost AU$260 million to date, until Lendlease secures more tenants or a capital partner.
“So until we get one of those two things to come to fruition, we won't restart,” Lombardo said. “From a capital perspective, we still see good returns in that project. So we don’t feel at the moment there's any risk of impairment.”
Lombardo said that of the work Lendlease launched this year, Hayes Point was unique in that it didn’t have outside capital backing the project.
Within the U.S., the San Francisco property market has been hit particularly hard. Following remote work trends that started during the pandemic, office vacancies have remained persistently high.
