Lendlease Is on the Rise in New York City
Lendlease has been a beneficiary of the highly visible New York City building boom, leaving its mark on such projects as 10 City Point Place in downtown Brooklyn; the Delta Airlines terminal at John F. Kennedy International Airport in Queens; and the high-end residential buildings sprouting up across the city.
The contractor is working on a number of Manhattan’s highest-profile high-rises that are clustered in midtown, including the Museum of Modern Art (MOMA) residence tower at 53 West 53 St. and seven projects on or near 57 Street, which has become known as Billionaire’s Row. These include One 57, the Nordstrom Tower, 220 Central Park South, 432 Park Ave., 520 Park Ave. and 252 East 57 St.
That steady stream of work has enabled Lendlease to grow its regional revenue by $80 million in 2014 and retain its fifth place ranking in ENR New York’s 2015 Top Contractors survey.
“There is an abundance of work right now,” says Ralph Esposito, executive general manager and president of Lendlease LMB Inc., Lendlease’s construction arm.
Area building contractors are responding to market fundamentals, which are sending a strong build signal, but 55% of the projects in the market now are in the high-end residential sector. That could appear to be an attractive market, but Esposito cautions that the market is cyclical and the tide could turn. “We are fortunate to have the high-end jobs, but there are only so many good views on the 57 Street corridor,” he notes. “No one knows how many rich people there are or how long they will continue to gravitate to New York.”
The high-end boom in New York has attracted foreign investment, not just from high-net worth individuals looking for a perch on Billionaire’s Row, but from foreign construction firms looking for a piece of the New York action.
Lendlease has Australian roots, but it is not new to the city. Founded in 1958 by G.J. Dick “Duss” Dusseldorp, the young company soon won contracts to build 200 prefabricated houses for workers on Australia’s huge Snowy Mountains hydroelectric project and on the first stage of the iconic Sydney Opera House.
Lend Lease, as the company was known then, expanded into Singapore and in 1979, into the U.S. through its Actus affiliate, which developed large-scale military housing tracts. Lend Lease’s U.S. activity ramped up in 1999 when it bought Bovis Ltd., which had been Lehrer McGovern Bovis and which had a strong presence in the New York City market. The firm adopted its current name configuration in June.
Lendlease earned its bona fides in New York City working on projects as varied as Citi Field, the home of the New York Mets baseball team; the renovation of Grand Central Terminal; demolition and cleanup work at ground zero; construction of the National September 11 Memorial and Museum; and the first phase of Columbia University’s new Manhattanville campus in Harlem. “Projects are like children, you’re not supposed to have a favorite, but I think a lot of people here feel very good to have worked on the 9/11 memorial,” Esposito says.
High Expectations
Working in New York, though, does not come without challenges. In the metropolitan market, designers are always trying to distinguish their projects. For example, the building at 56 Leonard St. in lower Manhattan that Lendlease worked on has cantilevered patios. After each concrete pour, the equipment had to be pulled back and set up again.
Another example of challenges that can be baked into the design in the New York market is 432 Park Ave., which Lendlease is building for CIM Group and Macklowe Properties Inc. It is the first time that poured white concrete has been used on such a large scale (ENR 2/2-2/9 p. 20). The 1,400-ft-high building is the tallest residence in the Western Hemisphere. “It took three years, so it was quite a challenge keeping the color consistent,” Esposito says.
The height of the building is a challenge in and of itself. When you get past 40 stories, the dynamics and logistics change. The wind is unpredictable at those heights, making it more difficult to operate cranes and hoists, Esposito says.
And, as with other luxury residences that are going up in Manhattan, there are high expectations “The tolerances are incredibly tight. It is like building a high-end house, except that it is 1,000 feet in the air,” Esposito says. Construction is proceeding on the MOMA tower while the museum next door remains open. “That is making my hair turn gray,” Esposito says.
In addition to physical challenges, New York City is a highly competitive and high-pressure market that can test firms in other ways. In 2012, a number of construction firms, including Lendlease, were swept up in a widespread federal investigation into the overbilling of clients. A former senior Lendlease executive admitted guilt in the case, and the firm agreed to pay $56 million in fines and restitution but was not prosecuted. Lendlease also adopted far-reaching corporate reforms, including appointing an integrity monitor.
The residential market, particularly the high-end sector, has been a boon, but Esposito says Lendlease is also being careful. “The discipline is not to get over-extended and not to over-select projects,” he says. Lendlease also is strong in the health care, cultural and education sectors. “We have relationships with all major hospitals in the region,” Esposito says. Jobs vary from $5 million to $400 million, but hospitals always have projects in the works in part because they have to build to adapt to technology advances. Lendlease was construction manager for the state of New Jersey’s $111-million Public Health Lab Facility in West Trenton, finished in 2010.
In the transportation sector, Lendlease is part of a joint venture with PB Americas to provide construction management services to MTA New York City Transit’s $1.4-billion Fulton Street Transit Center, set to open this year. The firm also managed the $227-million, 255,000-sq-ft expansion and renovation of Delta Air Lines’ Terminal 4 Headhouse at John F. Kennedy International Airport.
In the cultural and education sectors, Lendlease provided construction management services for the $138-million One Museum Mile, a residential development that houses The Museum for African Art. It also did program management for the first phase of a $110-million program at Buffalo State College.
A New Approach
Going forward, Lendlease’s expansion plans will be aided by the adoption of a strategy from its overseas operations.
Lendlease has long been an active developer in Australia as well as in London, Malaysia and Singapore. Now the company is “putting our Americas business on the same footing,” says Melissa Burch, executive general manager, development, for New York.
Through its Lendlease Development Inc. unit, Burch’s efforts will help fill the pipeline of projects that Esposito works on at Lendlease LMB Inc.
Burch says Lendlease is looking at an integrated model that includes building on its our own account as well as for third parties, and will develop projects across a wide spectrum, from condos and multifamily buildings to office and retail buildings.
One benefit of that integrated approach is that it offers much closer coordination of project planning in the preconstruction stage to expedite work, says Burch. The firm also can use its own balance sheet. Burch says Lendlease has $16 billion of funds under management.
Lendlease’s development efforts in the U.S. are focused on identifying projects in underutilized areas of gateway cities. Burch’s compatriots are developing projects in Boston and Chicago. The company also is looking at projects in Los Angeles and San Francisco.
In Manhattan, Lendlease’s first development project, a joint effort with Victor Group, is 281 Fifth Ave.—a 700-ft tower that will have 140 condos on top of a retail podium. The site, in the Madison Square Park retail area, is the home of a burgeoning tech industry and a hip neighborhood that is becoming a restaurant and food destination, Burch says. And, as with many of Lendlease’s other projects, “It will leave a mark on the skyline,” she says.
