After months of sustained pressure from some investors, LendLease is retreating to its Australian base and selling off its myriad of projects in the UK, US and Asia, hoping to repatriate A$4.5bn (€2.8bn).
Lendlease hopes the new strategy will shore up its share price which has shrunk the company’s market capitalisation to just A$4bn – a shadow of the A$11bn two decades ago.
The news on Monday sent Lendlease’s ASX-traded securities up 8% to A$6.35. Its share price has dropped 19% in the last year.
In February, Lendlease reported a 42% drop in profit and the poor performance galvanised the resolve of its big shareholders to force the company to return to Australia and renew its board.
Aware Super, which holds an 8% stake in Lendlease, and is a long-term capital partner is one of the unhappy shareholders which has urged the company to replace its chair, Michael Ullmer, who will step down at the end of this year.
It was not so long ago when the group had a development pipeline of more than A$100bn, many of which are large, long-tailed urban rejuvenation projects – the likes of Elephant and Castle in London and many more in around a dozen global cities.
It has successfully exported its residential expertise to develop military housing for the US Defense Department and in recent years has ramped up build-to-rent projects, with a development pipeline valued at A$28bn. Its repertoire includes sustainable office, social infrastructure, life sciences and others.
Then came COVID which ushered in work-from-home and the investors turned sour on commercial real estate. Soon the era of cheap money ended and Lendlease was stuck with unprofitable or hard-to-fund developments.
On Monday, Lendlease unveiled a “capital release unit” that will house the overseas projects ripe for sale out to financial year 2028.
Assets on this list include the TRX Exchange centre in Malaysia, and Ardor Gardens, a retirement community in Shanghai, China.
It has already sold half of its life sciences business to Warburg Pincus in Asia and 12 of its Australian communities projects to Stockland. Lendlease has already realised a 21% stake in a military housing scheme in the US. It aims to raise A$2.8bn from these disposals by the end of 2025.
It will sell land and inventory in San Francisco, Chicago and London. Lendlease had advanced the exit of its US construction operations, and it was in the “early phases” of selling its UK platform.
Projects that will come to the market include Hayes Point in San Francisco, Lakeshore East in Chicago and Deptford Landings in London. In all, it has listed 11 projects currently available for sale.
But Lendlease will honour its commitments to capital partners to finish their joint venture projects. It has the Habitat in Los Angeles and 1 Java Street in New York projects developments with Aware Super; the office component in both the Milan Innovation District and Stratford Cross in London with CPP Investment; The Forum, Boston with Ivanhoe Cambridge; the Elephant Park project in London with Daiwa House; and the Comcentre project in Singapore with Singtel.
The company plans to transfer projects, valued at A$7.3bn, on completion to its funds.
Chief executive Tony Lombardo remains committed to grow Lendlease’s funds under management, now a total of A$50.4bn, aiming increase that to A$70bn over the next couple of years.
On land management, the group will seek to revise agreements involving several projects in London such as Euston Station, Thamesmead Waterfront, Stratford Cross, High Road West and Silvertown.
Lendlease said it seeks to satisfy various obligations such as planning, remediation and so on, to maximise value capture.
Lombardo acknowledged the challenge that he faced. “I know what needs to be done, my team knows what needs to be done”, and there’s a plan in place to improve returns for shareholders, he told The Australian newspaper.
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