Lendlease, a prominent player in the real estate industry, has made headlines by finalizing an agreement to sell 12 Australian master-planned community projects to Stockland Corporation Limited and its partner, Supalai Australia Holdings, for a staggering A$1.3 billion. This deal, subject to several conditions including third-party consents and Foreign Investment Review Board approval, marks a pivotal shift in Lendlease’s strategic focus.

The Significance of the Transaction

This transaction is a key moment for Lendlease, signaling a strategic reweighting of capital towards Investments and lowering its gearing. Expected to realize a 20% premium to book value (pre-tax), the deal is projected to contribute A$130 to A$160 million to Lendlease’s FY24 core operating profit after tax.

Lendlease’s Strategic Approach

According to Lendlease Global CEO Tony Lombardo, this sale represents a chance to crystallize the value created in these projects, emphasizing the company’s focus on recycling capital to accelerate its investment-led strategy. This move is also part of maintaining balance sheet flexibility for future ventures.

Details of the Remaining Projects

Lendlease will retain four projects that are close to completion or anticipated to yield higher future value. These projects are currently valued at A$0.2 billion for FY23.

Future Financial Prospects

The transaction is expected to be financially beneficial for Lendlease, with cash proceeds approximately equal across FY24 and FY25. The final installment is due in early Q3 FY25, aligning with a 5% reduction in FY23 Group gearing.

Ongoing Capital Recycling Initiatives

Lendlease continues to explore capital recycling opportunities, including in China Senior Living and Australian Retirement Living, indicating an ongoing strategic shift in their portfolio.

Lendlease’s Market Forecast

Despite this significant deal, Lendlease’s market guidance for FY24 remains unchanged, with expectations of a core operating ROE at the lower end of the 8-10% range and FY24 gearing around the mid-point of the 10-20% target range.

  Australia, Lendlease, Stockland Corporation Limited, Supalai Australia Holdings, Tony Lombardo