Lendlease said it will still develop Singtel’s headquarters in Singapore (Image: Singtel)
Australian developer Lendlease Group plans to sell its overseas construction business to focus on operations at home as part of a business overhaul that the company says could free up as much as A$4.5 billion ($3 billion) of capital.
The restructuring aims to simplify the builder and fund manager’s operations and reduce costs while expediting divestment of some of its offshore properties and development projects, Lendlease announced in a statement Monday.
Tony Lombardo, global CEO of Lendlease[/caption]
Ullmer said in the statement that a major goal of the restructuring is to realise value for security holders by focusing on the firm’s “core strengths and competitive advantages,” with the company’s stock having lost more than 55 percent of its value since the dawn of the pandemic.
To fast-track divestment and free up capital quickly, the company has set up a dedicated Capital Release Unit (CRU) to free up as much as A$4.5 billion in capital with Lendlease saying it will start by disposing of A$2.8 billion worth of assets over the next 12 months. These sales include both planned and ongoing transactions such as a deal announced earlier this month to sell half of its Asia Life Sciences unit to private equity giant Warburg Pincus.
“We recognise that our security price performance and securityholder returns have been poor as we have faced structural challenges and a prolonged market downturn. We need to take significant action at an accelerated pace to deliver value for our securityholders, capital partners and customers,” Ullmer said.
Shareholders cheered the news, boosting Lendlease’s stock price by 8 percent on Monday.
The initial batch of divestments includes the sale of community and retirement living properties in its home country and military housing in the US, where it is the biggest private holder of homes for members of the armed forces.
The company said it will also dispose of a pair of major projects in Asia over the coming year, including the developer’s largest project in the region, The Exchange TRX mixed-use development in Kuala Lumpur. Also prepped for an exit in Asia is Ardor Gardens, Lendlease’s flagship senior living community in China.
The restructuring is expected to cost Lendlease up to A$1.48 billion in impairments and charges related to the project sales and as it writes down goodwill attached to its construction businesses in the US and the UK.
By the second half of 2025, the Capital Release Unit will begin divesting other international construction and development projects, as well as unsold apartments in overseas projects with those sales estimated at A$1.7 billion in total.
The firm said proceeds from the divestments will be used to pay down debt and fund a A$500-million stock buy-back program.
Fund Managment to Continue
As it makes plans to sell off some assets, Lendlease made clear that it still aims to complete select ongoing joint ventures in Singapore, New York, Los Angeles, London and Milan.
In Singapore, where Lendlease bases its Asian operations, the company intends to stick with a redevelopment of Singtel’s headquarters in downtown Singapore which was valued at S$3-billion (then $2.2 billion) when it secured the deal in June 2022. The company will also retain the Paya Lebar Green project it won in the city’s eastern region in 2021.
Lendlease, which controls the manager of SGX-listed Lendlease Global Commercial REIT, also plans to retain its international investment platform, with Lomdbardo saying the company aims to further expand its A$50.4 billion in funds under management
“We will leverage our scale and improve performance through active portfolio management, reducing our co-ownership interests over time, and right sizing our cost base through removal of regional cost structures that have weighed on performance,” Lombardo said.
Lendlease booked a loss of A$136 million in the half-year ended December 2023 following shortfalls totaling A$641 million in three of the four previous fiscal years.
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