Friend or foe: Lendlease may be Wylies white knight in Sydney CBD

Lendlease seeks partners

Documents sent to lenders last year show Lendlease’s influence over the debt deal. Some time in 2022, Lendlease signed a heads of agreement to acquire the property off Milligan Group. The documents stated the price as $685 million.

The agreement was non-binding, but lenders were told Lendlease was keen and would even help out with the leasing. Further, the pitch added that Lendlease’s interest in Milligan’s tower would hold even if it lost its joint bid with Justin Hemmes to develop twin towers above the planned Hunter Street metro station.

Street Talk can confirm Lendlease was still exclusive as of Wednesday afternoon, and expected to seek capital partners of its own. But you only have to look at the broader office market to know Lendlease – or its soon-to-be capital partners – won’t be paying anywhere near $685 million for the Milligan skyscraper.

Should the valuation tumble, there’s the question of what it would mean for the lenders, who were told to expect the 16-month loan to pay 8 per cent above the bank rate, plus deferred interest payments at expiry. The building has to be sold for the loan to be repaid. Needless to say, that 16 months is up soon.

Supporters were also pointing to the loan’s low LVR and decent cap rate to argue the site’s valuation would have to nose-dive significantly before lenders incur any losses. Demolition begins in July, leasing is already in the works and Lendlease is still committed, they said.

Street Talk can also reveal the loan included a six-month extension, which, if exercised, could kick the can down the road to January. However, Milligan and lenders would still have to face the valuation test eventually.

When contacted by this column, Tanarra said it expected to be repaid in full.

“The project continues to progress in line with the development timeframe set out by the sponsor and the syndicate remains supportive of the project,” Merricks said.