Lendlease Loss Widens to $1B on Write-Downs Tied to Business Rejig

Lendlease reported a loss of A$1.5 billion ($1 billion) for the fiscal year to June, ballooning from a year-earlier deficit of A$232 million, as the Australian real estate group booked write-downs related to an ongoing business overhaul.

ASX-listed Lendlease recognised A$1.38 billion in impairments and charges, including a A$513 million write-off of goodwill from the 1999 acquisition of UK-based Bovis Construction, according to Monday stock filings. Investment property valuations fell A$260 million compared with fiscal 2023 levels, representing a roughly 10 percent drop.

Despite what he termed “challenging business conditions” in fiscal 2024, CEO Tony Lombardo said Sydney-based Lendlease made significant progress towards its target of recycling A$2.8 billion in capital in fiscal 2025, having announced transactions totalling A$1.9 billion.

“Our immediate priorities are to strengthen our balance sheet, return capital to securityholders and invest in our high return Australian operations, while continuing to build on our Australian development pipeline to support future earnings growth,” Lombardo said.

Strategic Shift

Lendlease is in the midst of a “strategy refresh” under which it plans to scale back overseas development activity and focus on domestic operations. The company estimates that the overhaul could free up as much as A$4.5 billion in capital for deployment Down Under.

Lendlease announced earlier this month that it had achieved the final closing of its Asia Pacific life sciences joint venture with US private equity giant Warburg Pincus. The Singapore-based JV aims to grow into a multi-billion-dollar platform by acquiring, developing and operating life sciences projects in fast-growing regional markets.

The transfer of Lendlease’s life sciences interests to the Warburg JV is expected to contribute A$80 million in after-tax operating profit to the group, according to a stock filing.

In July, Lendlease disclosed a deal to sell its US military housing business to American investment firm Guggenheim Partners for A$480 million. Lendlease anticipates an after-tax operating profit of A$105 million to A$120 million on the sale, which is expected to be completed by the end of the first half of fiscal 2025.

Also pending is Lendlease’s A$1.3 billion sale of 12 master-planned residential projects under the Australian Communities brand to a joint venture of ASX-listed builder Stockland and Thai developer Supalai. The deal continues to face scrutiny from Aussie regulators over concerns that Stockland would become too prominent in some markets.

Turning the Page

Lendlease expects net cash proceeds of A$2.4 billion in fiscal 2025 from the announced deals and from apartment settlements at the recently completed One Sydney Harbour.

The Renzo Piano-designed three-tower complex, launched in 2019, welcomed its first residents in March, the Australian Financial Review reported. Investors in the development include Japanese property giant Mitsubishi Estate, which acquired a 25 percent interest in the second residential tower in 2021.

Lendlease’s ASX-listed shares slid more than 1.5 percent Monday before paring losses to close at A$6.30, down 0.8 percent.