Inside Lendlease’s Super $2B Partnership
Lendlease Managing Director Jason Alderman details the company’s venture with First State Super. The newly formed platform made its first two multifamily acquisitions, totaling $400 million, in Chicago and Boston.
Lendlease and First State Super, an Australian superannuation fund, have each committed $500 million in equity to a new investment vehicle targeting infill locations in major cities across the U.S. The final goal is to create a $2 billion, geographically diverse portfolio of new multifamily developments. Chicago’s Southbank, a new district along the south branch of the Chicago River, and Boston’s Clippership Wharf are the platform’s first projects, with a total end value of $400 million. The property and infrastructure company will take on the role of development, construction and investment manager for the partnership’s future operations.
Jason Alderman, managing director of property for Lendlease, takes us behind the scenes of this newly formed partnership and discusses its strategy, project updates and market trends.
What can you tell us about this partnership? How long was it in the works and how did it all come together?
Alderman: We were developing these two seed assets all-equity from our balance sheet and always intended to bring in a partner to recapitalize deals as they were delivered, and ultimately selected First State Super, who we have a longstanding relationship with in Australia. One of the main things that attracted us to work with First State Super was their commitment to building a platform of scale alongside Lendlease, and we are very excited to be their first U.S. multifamily development partner. We’ll be jointly holding these assets post-completion, and potentially bringing in additional investors as the portfolio stabilizes into a long-term core vehicle.
What will be this new platform’s investment strategy?
Alderman: The partnership will be investing in urban multifamily ground-up development projects in major markets—New York, Boston, Chicago, San Francisco and Los Angeles. Fundamentally, we believe in these cities over the long-term given their diversified employment base, highly educated workforce, public infrastructure, investor demand across cycles and job/income growth. In these markets, Lendlease holds land that can deliver more than 4,000 additional residential units in the coming years, and some of this pipeline may be contributed to the venture, but we are actively pursuing new deals. The market remains very competitive and we are being very selective, but we can move quickly with capital certainty for deals we believe in.
The partnership’s first two developments are Southbank in Chicago and Clippership Wharf in Boston. What can you tell us about the projects?
Alderman: Clippership Wharf sits on a 7-acre site in East Boston, offering the best views of the city’s skyline on the edge of a restored living shoreline and immediately adjacent to the Blue Line leading back into the Financial District. The development will combine a large public park with four residential buildings, and preleasing for the apartments will begin this fall. In Chicago, The Cooper, which is the first phase of our larger Southbank project, is a 29-story building with 452 apartments. We opened The Cooper last month. We are actively permitting two other projects that may be part of this partnership and hope to be able to talk about these later this fall.
What will set these projects apart from similar product?
Alderman: Lendlease prides itself on working with talented architects, and together we are trying to create more than just spaces for people to live in. So, while we start from the inside to ensure we have high-quality layouts that work well for our residents, we ultimately care about architecture from an exterior perspective, and I think we often are investing more into massing and facade than competitors because we believe this adds value over the long-term.
We also invest heavily into place creation, meaning we take the time to ensure our projects not only fit into the communities they are developed in but are additive to them. For example, at Clippership Wharf in East Boston we’ve taken a long-dormant site, completed environmental remediation, and will be delivering a new waterfront park, public art, kayak center and living sea-wall. In Chicago, we will be delivering a large public park as well. All of these features benefit our residents but also benefit the cities they’re built in as a whole.
Name a few major trends in the U.S. multifamily market.
Alderman: There are a number of positive trends driving the U.S. multifamily market. Young workers continue to favor major urban environments, families are staying in cities longer, and Baby Boomers are downsizing and moving back into cities. The homeownership rate has gone down driving rental demand, and the recent tax changes make renting potentially more economical than owning in a number of our markets.
Images courtesy of Lendlease