Lendlease Eyes $4.5bn Boost from Overseas Asset Sales

Lendlease will start selling off all overseas projects and assets to focus its capital on its Australian business.

The developer estimates the sale will bring about $4.5 billion in capital back into Australia.

It will include the completion of many transactions that have been announced or planned as well as the developer leaving international projects currently under construction, Lendlease told the market late last week.

The new focus of the company will be on its international investments platform and its Australian projects with a restructure of the organisation also hinted at.

Lendlease expects to make the majority of the changes within the next 12 to 18 months.

The changes will allow the developer to keep costs down with $125 million saved annually in tax and $3.42 per security released from its net tangible assets.

It is also expected to create a stronger balance sheet with reduced gearing at 5 to 15 per cent.

There will be an option for securityholders to get money back through a $500 million on-market buyback scheme.

▲ A render of Kennon and Ewert Leaf’s design for Lendlease’s Collins Wharf 4 at Melbourne’s Docklands.

“By reshaping the portfolio, concentrating on our core competencies in markets where we have proven we have the right to play, and the competitive advantage to win, the financial and operational risk profile will be lower, and we believe the quality of our earnings ultimately higher and more sustainable,” Lendlease Group chief executive Tony Lombardo said.

“We are well advanced on several transactions, and we have clear plans of action to implement the necessary change to reorient the organisation.

“Moreover, the opportunities to grow remain significant with a robust project pipeline that plays to our core competitive strengths, especially in urban regeneration.

“We are exceptionally well placed to benefit from the key structural shifts under way in the economy.”

Lendlease Group share performance

▲ Lendlease Group shares have been stuck in a persistent downtrend, this Google Finance five-year chart shows.

Lendlease shares reacted positively to the overseas exit news, jumping about 10 per cent in intraday trading on May 27.

But they had been plumbing near multi-year lows after tipping into an ugly downtrend from early 2020. On November 19, 2019, the shares notched an intraday high of $19.95. By May 24, 2024, however, they had hit a fresh low to close at $5.89.

It’s been a challenging period post-2019 for the company with declining earnings, reduced dividends, lower market capitalisation and negative returns on equity and capital. Cash flow and investment income were volitile, and net gearing rose, according to CommSec data.

Debt reduction

Around $2.8 billion of the estimated $4.5 billion in capital is expected to be freed up by 2025.

“Our priority will be to pay down debt and efficiently return capital to securityholders,” Lombardo said.

“This is a profound change.

“And is based upon making some very tough but necessary decisions.”

Around $1.15 billion to $1.47 billion in impairments and charges are expected pre-tax in the financial year for 2023-24.

These will include the writedown of goodwill for the US and UK construction businesses that Lendlease acquired through the Bovis acquisition in 1999.

The intent to sell 12 Communities projects and the Asia Life Sciences interests have already been announced.  

Lendlease’s latest projects include the residential towers Collins Wharf 4, 5 and 6 in Melbourne’s Docklands that it recently filed planning applications for. 

They are not the only Australian property outfit retreating globally. Brisbane-based Cromwell Property Group has offloaded the last of its overseas interests, selling its European arm for $457 million. 

Global ratings agency Moody’s vice-president Ian Chitterer said it would come down to how the new Lendlease strategy was implemented.

“If executed as planned, these measures will be credit positive in the longer term,” Chitterer said.

“However, Lendlease’s credit quality over the next 12 to 18 months will still be heavily dependent on improving earnings, receiving proceeds from already announced transactions, and reducing debt levels.”