Lendlease, San Francisco Reach Deal on $1.2B Unfinished Multi-Use Tower

City officials in San Francisco have reached a deal with Lendlease in what the city hopes will revive the Australia-based developer’s project to build a 47-story mixed-use tower at the intersection of Market Street and Van Ness Avenue.

Lendlease halted construction last year on the $1.2B project, known as Hayes Point, which according to the approved plans will include 333 condos above 290K SF of office and retail space.

In May, Lendlease announced a strategic shift that appeared to doom Hayes Point, its largest U.S. investment; the developer said it would pull out of international development and sell several U.S. assets, including the tower site at 30 Van Ness, to focus on its domestic business.

However, the company confirmed this week that it has negotiated an agreement with the city that could be a prelude to reviving the Hayes Point project, which paused in August 2023 after excavation and initial foundation work was done at the site, the San Francisco Chronicle reported.

City approvals granted in 2020 for the Hayes Point tower included a 25% on-site affordable housing requirement that designated 83 of the units in the tower to be offered at below-market rates. The city has now agreed to strike the affordability requirement, making the 83 condos market-rate units.

Under a proposal introduced this week by Mayor London Breed and Supervisor Matt Dorsey, the Hayes Point site will be designated a Special Use District, an overlaid zoning district that allows relief from land use restrictions.

Hayes Point was the largest project that began in San Francisco after the outbreak of the pandemic, but it did not benefit from a series of post-pandemic steps the city took last year to rekindle pipeline projects, including reducing affordable housing requirements and lowering or delaying associated impact fees.

Under its original development agreement with the city, Lendlease paid $40M in impact and other fees, including $13M associated with affordable housing.

Claire Johnston, Lendlease’s CEO for the Americas, told the Chronicle that the city has now agreed to bring the Hayes Point project “in line” with other developments benefitting from recent policy changes, adding that the $40M in already paid fees now “essentially represents a large overpayment.”

“Rather than have those funds returned by the city, we are seeking to simply have the $40M, along with all of the other fees we have already paid, be considered as our total affordable housing offering,” Johnston said, adding that the deal gives the Hayes Point project “a viable chance to succeed once the market normalizes.”

Johnston told the newspaper that Hayes Point is not actively being listed for sale but couldn’t provide a timeline for restarting the project, which originally was scheduled to be delivered in 2026.

“Hayes Point, and other projects, will also need other factors including capital markets, interest rates, and commercial leasing to normalize before being fully viable,” she said.