Lendlease, the Australian developer behind the only major high-rise in San Francisco to break ground during the pandemic, is pausing construction on its Hayes Point development pending the signing of new tenants or a capital partner.
The planned $1.2 billion development, which broke ground last year at 30 Van Ness Ave., is slated to consist of 333 units of for-sale condos and around 300,000 square feet of office and retail space.
The decision is a blow for the company's largest investment in North America and the only major high-rise in San Francisco to kick off construction during the pandemic.
According to Lendlease’s recent financial filings, completion for the 47-story project is currently tagged at fiscal year 2027. The original delivery date for the project was in 2025.
Lendlease Global CEO Tony Lombardo said on a Monday earnings call that the project’s construction has been paused pending commitments by tenants or new capital partners.
“Until we get one of those two things to come to fruition, we won’t restart," Lombardo said, noting the company had invested roughly $170 million into the project to date. He added the company still sees potential in the project and doesn’t foresee a permanent reduction in the asset’s value.
Hayes Point was a bit of a rarity in Lendlease’s portfolio as it was completely self-financed by the company. Although there have been some signs of life in recent months, San Francisco’s commercial real estate market is still contending with record-high vacancies and among the lowest return-to-office numbers of any major metro market in the country.
At the same time, Lendlease is facing growing pressure from activist investors, and Lombardo has taken efforts to cut costs at the company. Last month, Lendlease laid off roughly 10% of its global staff—around 740 positions—to a shift to a “leaner operating structure.”
A Lendlease spokesperson said the company will explore options for a potential restart on the project in 2024. The company’s San Francisco team will continue to work on project activities such as permitting and coordination with public agencies.
This is the second major halt to Hayes Point to date. Earlier this year, construction stalled after entitlement issues related to the project’s impact to nearby BART infrastructure and weather impacts.
Previously, the company positioned the project as a countercyclical play to build and deliver new office inventory in a market with no competition. Clearly, the decision to hit pause has shown that the company is not immune from the larger economic forces at play.