Welcome boost for Lend Lease pipeline

LEND LEASE is poised to reap sizeable development profits from its partnership in the winning consortium for the redevelopment of the $1 billion Sydney Convention, Exhibition and Entertainment Precinct.

Brokers said the deal would be a significant boost to Lend Lease's development pipeline at a time when construction remains under pressure.

The project will also be a boost to the local building sector in a year in which five big developers hit the wall through lack of work.

Experts warn the coming year will also be tough for the construction sector.

The NSW managing director of Rider Levett Bucknall, Bob Richardson, said in the group's most recent Oceania report that the construction market was static as the industry adapted to a reduced workload.

"There appears, in the short term, little prospect for improvement in workload as there are large variances in the values of building approvals on a month-on-month basis, as reported by the Bureau of Statistics," he said.

Lease Lease and its partners beat its competitors Brookfield Multiplex. The deal will allow the group to effectively book-end the redevelopment of the Darling Harbour precinct from Barangaroo South to near Haymarket.

Lend Lease, as part of the Destination Sydney consortium including HOSTPLUS, Capella Capital, AEG Ogden and Spotless, will work with Infrastructure NSW to enter into a $1 billion public private partnership to design, construct, finance, maintain and operate the convention, exhibition and entertainment facilities.

Anthony Passe-de Silva, an analyst at JPMorgan, said in a note to clients that Lend Lease would secure a number of earnings streams from the project by acting as the public-private partnership development manager/financial adviser (via Capella Capital), delivering design and construction services (via project management and construction) and investing 50 per cent of the project equity.

"The redevelopment of the five-hectare site also provides further opportunities to expand and lengthen the group's mixed use development pipeline," he said.

"Lend Lease believes that the site could have an end development value of over $1.5 billion, including 1400 apartments, 15,000 square metres of commercial space, 7000 square metres of new retail space and a 900-room hotel."

He said using Lend Lease management's "rule of thumb", the project could deliver about $150 million in pre-tax earnings over the life of the project.