June 6, 2024

FEATURED IN THE AUSTRALIAN: Lendlease teams with Milligan Group on timber tower in Sydney CBD


By Ben Wilmot, Commercial Property Editor
Published 9:11am June 6, 2024

Property heavyweight Lendlease is backing the development of the world’s tallest timber tower in the Sydney CBD, which is being undertaken by the private Milligan Group, as it returns its focus to Australia.

The listed giant is looking to return $4.5bn worth of capital from its sprawling international operations back to local projects and the Sydney skyscraper is being billed as one of its prime projects.

The deal, confirmed in a presentation to investors on Wednesday, would see Lendlease come in as partner on the project after months of behind the scenes work. The company’s development arm will partner with Milligan on the project.

Lendlease has the site under exclusivity and is undertaking due diligence. It presented the opportunity to potential capital partners at its investor day and its development unit is separately buying a site in Melbourne, where it is planning luxury apartments as the focus shifts to local projects.

While a builder for the main works in Sydney is yet to be selected, the focus is now on locking in major capital partners who want exposure to the prime end of the office market.

Cushman & Wakefield and JLL have been drafted to advise on a forward sale transaction aimed at locking in local and offshore partners — a play which has been used to get major towers off the ground in the city, including the nearby Salesforce Tower, which Lendlease developed.

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The planned $1.8bn tower, dubbed Halo, is winning traction among corporate tenants keen to shift into next generation towers which have top environmental credentials, and big investors are keen to back the latest green offices even as lower quality buildings fall by the wayside.

The project is designed to set a new benchmark in office design, blending sustainability, architecture, wellbeing, and lifestyle. Designed by Bates Smart Architects, it will be one of the world’s most sustainable buildings and the world’s tallest hybrid timber tower at 220m.

It will have one of Australia’s largest facade PV arrays, use low carbon concrete, be all electric and have net zero emissions, with a top-flight 6 Star Green Star and 6 Star NABERs rating.

It will also sport a 4000 sqm premium health and wellness centre, 3000 sqm of top restaurants and bars and more than 40,000 sqm of premium office space which will hit the market as rival projects are already completed or filling up.

Milligan won initial approval for the plan to develop the skyscraper in 2022, in one of the largest city property plays in the wake of the pandemic, and settled on the site last year with the backing of Merricks Capital.

It would be one of the only large new towers in the wake of the coronavirus crisis, alongside Charter Hall’s Chifley South and Mirvac’s 55 Pitt St, with the building squarely pitched at the best corporate tenants.

The planned skyscraper on the corner of Pitt & Hunter streets would rise about 55 storeys and sit in the city’s core precinct. Milligan assembled it via years of quiet deal-making and building up positions, giving it control of five key properties which form a “super site” for the tower, with Lendlease aiding it for more than a year.

The tall, slim style is partly designed to lift the tower onto the city skyline with a prominence like Australia Square and the MLC Centre when they were first developed.

The boutique A-grade development will also be served by the new Hunter Street Metro Station, which adjoins the Milligan site’s western boundary, with two over-station towers planned longer-term.

The site, spanning 15-25 Hunter St and 105-107 Pitt St, is in Sydney’s core precinct which is favoured by the financial, legal, property and technology sectors.

Milligan has a strong record in development and, in partnership with Stamford Capital Australia and Quintet Partners, developed the Workshop office building in Sydney’s inner-city Pyrmont. It was pre-sold to Suntec REIT for about $297m in 2019.

Milligan also developed a new hybrid building at 32-36 York St, transforming the 1886 heritage complex into a boutique A-grade commercial space.

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