Lendlease’s Genentech/Roche Biologics facility in Singapore (Image: Lendlease)
Australian builder and property investor Lendlease Group has agreed to sell its Asia Pacific life sciences platform to a newly established 50:50 joint venture with US private equity giant Warburg Pincus, as the embattled builder continues to overhaul its business following multi-year losses and growing shareholder dissatisfaction.
The transaction, which Lendlease described as part of its ongoing “simplification”, will see the Sydney-based firm transfer its Asia Pacific life sciences construction and development capabilities, as well as its life sciences investments in the region, to the joint venture in a deal valued at S$129 million ($96 million).
“With the combination of Lendlease’s 30-year track record in the Asia Pacific supporting the world’s largest pharmaceutical and life sciences companies and Warburg Pincus’s experience and track record in investing and scaling platforms, the joint venture is well-positioned to become the leading integrated life sciences real estate business in the region, offering compelling new investment opportunities to our investors,” Lendlease Group global chief executive Tony Lombardo said in a release on Friday.
The transaction was announced the same day that a report by the Australian Financial Review, citing people familiar with the matter, revealed that Lendlease chairman Michael Ullmer is preparing to step down, after shareholders clamoured for an overhaul of the company’s strategy following a 57 percent plunge in its stock price over the last five years.
Singapore-Centred Platform
Lendlease’s Asian life sciences projects centre on Singapore and mainland China, according to the company’s website, where it has completed over 100 projects including laboratories, research centres and manufacturing facilities on behalf of pharmaceutical and biotech clients, including facilities at Singapore’s 280-hectare Tuas Biomedical Park.
Tony Lombardo, global CEO of Lendlease
The company had also in 2022 teamed up with Dutch pension manager PGGM in a S$1 billion partnership to invest in innovation and life science properties across Australia, Japan and Singapore.
Lendlease expects to realise approximately A$66 million in net proceeds from the transaction, which is subject to completion adjustments and conditions precedent, including third party consents.
“This is another example of how we’re realising value from our existing operations, while further simplifying Lendlease to create a more focused company for securityholders,” said Lombardo.
While Lendlease has maintained its return on equity guidance of 7 percent for the fiscal year ended June, the company noted that achieving this return is conditional on the execution of several transactions, including forming the Asia Pacific life sciences joint venture and the sale of 12 of its Australian Communities master-planned residential projects, which it agreed in December to sell to ASX-listed builder Stockland and Thai developer Supalai for A$1.3 billion.
Disgruntled Shareholders
The transaction comes after Lendlease, which operates a property development and construction business spanning Europe, North America and Asia, in addition to its home market, reported a loss of A$136 million in the half-year ended 30 December following shortfalls totaling A$641 million in three of the four previous fiscal years. The company has attributed the losses to rising interest rates and supply chain difficulties driving up construction costs, while asset revaluations, impairments and restructuring costs have further dented profitability.
The company is due to face investors on 27 May, when Lombardo and chief financial officer Dixon will provide an update on the company’s business strategy and address shareholder concerns. Ullmer, who joined Lendlease’s board in 2011 and was appointed chairman in 2018, is expected to announce his exit at the event.
Shareholders including investment firms Tanarra Capital, Allan Gray and HMC Capital have called for Ullmer’s ouster and demanded that Lendlease scale back its overseas operations, particularly in the US and Europe, in order to focus on its core business in Australia.
In a seven-page letter to Lendlease’s board last month, Melbourne-based Tanarra Capital blasted the company as “unfocused and overextended” while calling for a “radical overhaul.”
Earlier this week, the company was hit with a A$112 million tax bill relating to its 2017 sale of 25 percent of its retirement living business to Dutch pension manager APG. Lendlease has said that it intends to dispute the charge.
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