Lendlease Construction Gains Fail to Overcome Divestment Woes

Lendlease introduced its Capital Release Unit in 2024 to accelerate capital recycling and address the issue. 

The temporary business unit was developed to ring-fence and sell up to $4.5 billion of non-core international and domestic assets, to enable Lendlease to pay down debt and refocus on its “core” investment, development and construction units. 

And in these units, Lendlease has prevailed. Its development and construction operations units were at the top of guidance, led by a strong operational performance from construction, the company said. 

But “disappointingly” the group results were impacted by costs and non-cash impairments from Lendlease’s Capital Release Unit. 

Transactions continued to progress in CRU, it said, with $1.2 billion contracted in the full year and a cost reduction program under way.

▲ Lendlease last week announced it had offloaded its 50 per cent stake in Westfield Carindale to Cbus.

However, it was not enough to turn the ship around. 

Lendlease said that because of “negative investment property revaluations and impairments in the CRU department,” it returned an operating loss after tax of $800 million. 

This was partially offset by an operating profit after tax of $233 million from the construction segment, with a $4.7 billion pipeline of new Australian developments. 

The development department benefitted from the timings of major completions, including Residences Two and Watermans Residences at One Sydney Harbour—apartments settlements for which reached $250 million—and the divestment of Capella Capital. 

Lendlease upped its development pipeline, closing at $13.2 billion for the year, up from $9.8 billion at the end of the prior full year, and its construction segment had had a “significant recovery” in earnings and margin. 

Lendlease joint interim chief executive officer and group chief financial officer Andrew Nieland said that strengthening the balance sheet remained the company’s priority.

To that end, last week Lendlease’s Prime Property Fund Retail sold its 50 per cent interests in Lakeside Joondalup in Western Australia (pictured at top) and Westfield Carindale shopping centre in Brisbane to Cbus Property for $1.3 billion. 

Lendlease said the deal reflected confidence in the fundamentals of Australia’s retail sector and marked a “successful outcome” for the fund’s liquidity program 

Growthpoint, Centuria post results

Full-year results season is upon us as publicly-listed companies operating in the property market join other ASX-listed firms to release 12-month financials. 

Growthpoint Properties Australia secured results near the top of its guidance range, delivering funds from operations of $177.6 million and a statutory net profit of $90.1 million. 

Office leasing of 81,022sq m and a 95 per cent occupancy were delivered, alongside industrial leasing of 117,934sq m and a 98 per cent occupancy with a weighted average lease expiry of 5.6 years.

Elsewhere, Centuria Industrial (CIP), Australia’s largest listed domestic pure-play industrial REIT, has had a strong year as it increasingly turns its attention to data centres. 

The REIT executed 226,200 sq m of leasing activity representing 18 per cent of portfolio gross lettable area, which it attributed to “persistent tenant demand for high-quality urban infill industrial accommodation”. 

It returned $114.1 million in Funds From Operations. And divested five assets for $200 million. 

CIP has also been increasing its exposure to data centres, according to CIP fund manager and Centuria head of listed funds Grant Nichols.

“Within the CIP portfolio, there are several assets with characteristics suitable for large-scale data centre conversion, some of which are capable of being ‘ready for service’ in the relatively near future, which may align when supply shortages are most critical,” Nichols said.