PROPERTY developer Lend Lease Group has secured $2 billion in commitments from retirement funds and its own property fund to develop the first two towers at its Barangaroo South site, a project that ranks as one of Australia's biggest developments.
The funds will allow the development of towers for which tenancy agreements have been signed with Westpac and KPMG to lease 71 per cent of space in the precinct, a former port terminal adjacent to Sydney's main business district.
Lend Lease plans to create a new financial hub for the city after it began work on the $6 billion redevelopment project late last year.
The 22-hectare site will contain 300,000 square metres of commercial floor space.
"Barangaroo South demonstrates Lend Lease's ability to provide access to high-quality, scarce development opportunities," chief executive Steve McCann said.
A further cut in Australia's interest rates "would help everybody", Mr McCann said in an interview on ABC television.
Some $1 billion of the funding will be provided by the Canada Pension Plan Investment Board, which invests for the country's state retirement plans, with $500 million coming from Lend Lease's Australian Prime Property Fund Commercial.
The project represents the CPP's single biggest real estate investment to date.
The remainder would be provided by Telstra Super, the pension fund for the telco's staff, and First State Super, an independent retirement fund.
"This is an excellent opportunity to invest in a high-quality, iconic commercial waterfront real estate development alongside Lend Lease, one of the region's top developers and APPFC, an aligned, local institutional partner," CPP's senior vice-president for real estate investments, Graeme Eadie, said in a statement.
"This investment supports our real estate strategy to acquire premium, long-term assets in key global markets," he said.
The vacancy rate in Sydney's CBD increased from 9.3 per cent in July 2011 to 9.6 per cent in January, as more than 80,000 square metres of new space was added to the market amid slower take-up, property broker Colliers International said in a report on the industry's performance in the first half. BLOOMBERG, AGENCIES