Lendlease to Exit International Property Development

Highlights:

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• Lendlease to exit all international property development and sell overseas construction divisions.
• Strategy shift marks the largest change since the sale of MLC to the National Australia Bank.
• Proceeds from asset sales to be used for debt reduction and capital return to shareholders.

Major Shake-up for Australian Real Estate Giant

Lendlease (ASX: LLC) will exit all international property development and sell its overseas construction divisions, marking a significant shift for the Australian real estate group. This move, the biggest since Lendlease sold MLC to the National Australia Bank over two decades ago, involves plans to offload more than $4 billion in international projects, mainly in the US and UK, over the next three years.

Focus on Domestic Market

The board has approved the strategy, which will be presented to shareholders on Monday. Proceeds from the sales will be used to reduce debt and return capital to shareholders. The retreat will refocus Lendlease’s construction and development activities on Australia, where it has historically been more profitable, with projects like Sydney’s Barangaroo and Melbourne’s Docklands.

Managing the Transition

CEO Tony Lombardo will oversee the divestment of international assets, with the first sales expected this year. The company aims to avoid a fire sale by managing the process over several years, but the decision will likely result in over $1 billion in write-downs due to the challenging property market.

Retaining Asia-based Investments

While Lendlease plans to exit cyclical offshore construction and development businesses, it will retain its Asia-based investment platform. The decision follows growing investor criticism of Lendlease’s international performance and capital allocation.

Background and Impact

The company's international operations include unfinished developments in Malaysia, the US, Italy, and the UK. These projects, initiated during periods of low interest rates and high property prices, have become unprofitable. The divestment will involve splitting the US and UK operations before sale.

Board and Investor Reactions

The move comes amid pressure from major investors like Tanarra Capital and Allan Gray. Lendlease’s board will also undergo changes, with the departures of chairman Michael Ullmer and director Nicola Wakefield-Evans by November.

As Lendlease prepares to present its new strategy, investor scrutiny remains high, with shares down 21% year-to-date. The company's market value has declined from over $11 billion to $4 billion in two decades, underscoring the need for a successful strategic reset.

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