Australia’s LendLease Group (LLC.AX) on Thursday said it secured a contract with Alphabet Inc’s (GOOGL.O) Google to develop $15 billion worth of residential and retail space in Silicon Valley, sending the builder’s stock to a more than eight-month high.
The deal is a significant boon for LendLease, coming at a time when Australian developers navigate the domestic property market’s worst downturn in a generation, characterized by a drop in building approvals and tighter consumer spending.
It is also a major win for LendLease’s strategy to expand abroad, and will see it reinforce its core role as a residential developer after being hobbled by its engineering division.
“It’s an important deal and the client is very well known and it’s likely to be a very innovative development,” said Michael McCarthy, chief market strategist at CMC Markets
“So in reputation terms, it’s a positive for the company and it may very well attract further attention, in particular attention from international players.”
The announcement sent LendLease’s share price up in morning trade by as much as 5.3% to A$14.84, its highest since Nov. 8.
In a statement, LendLease said it will develop up to 15 million square feet (1.4 million square meters) of residential, retail and hospitality space and associated amenities in the San Francisco Bay Area, and that Google will develop office space.
Last month, Google said it would set aside $750 million worth of land and $250 million in financing to spur developers in the San Francisco Bay Area to build at least 20,000 homes and renovate other housing over the next decade.
LendLease said it will partner Google for the next 10 to 15 years to redevelop the U.S. firm’s landholdings in Sunnyvale, San Jose and Mountain View, with work starting as early as 2021.
It quoted Google Vice President of Real Estate and Workplace Services David Radcliffe as saying the deal would boost the tech firm’s plans to “accelerate the production of residential units in the Bay Area” and “build mixed-use developments”.
“LendLease will play a key role in helping deliver at least 15,000 new homes on our land,” Radcliffe said in LendLease’s statement.
LendLease is currently involved in over 100 developments in the United States with most of its marquee projects located in New York. The Americas accounted for 25% of new work secured last year, LendLease’s 2018 annual report showed.
In February, it reported a 96.3% drop in first-half net profit due to reduced productivity in its engineering and services businesses, and cut its dividend by almost two-thirds.