Lendlease ditches global building ambitions

Lendlease CEO Tony Lombardo announced a major restructuring of its operations offshore back to Australia after its shares plummeted. Jane Dempster/The Australian.

Embattled developer Lendlease is stepping up its exit from offshore markets, tying up the sale of its British construction business for about $70m to US private equity firm Atlas Holdings and striking an office tower deal in London.

The sale completes Lendlease’s exit from international construction after it offloaded its US and Asian construction operations, with the company keen to move away from the risky low-margin area that has often generated costly writedowns.

The construction exit came just 10 months after Lendlease dramatically reversed course and pulled back from global development and building and pledged to return $4.5bn to its growing its local operations.

Sotetsu and Yasuda have acquired a 20 per cent interest in 21 Moorfields in London

It is betting that it can restore value by refocusing on its Australian operations and its international investment management business, which it is building up.

Lendlease last week brought two new Japanese investment partners, Sotetsu Urban Creates and Yasuda Real Estate, into a London tower. They jointly acquired a 20 per cent interest in premium-grade block 21 Moorfields from Lendlease at book value of $131m. Lendlease has kept a 5 per cent interest in the complex, in line with its portfolio co-investment target of 5-10 per cent, and will remain as the investment and asset manager.

Lendlease had led a consortium that snapped up Deutsche Bank’s then near complete new London headquarters building in 2022. That $1.38bn deal was one of the largest office trades in the wake of the pandemic and was backed by NSW body TCorp and another unidentified investor, with Lendlease also contributing part of the equity to the deal.

Bringing in the Japanese investors follows $1.5bn of recent investment mandate wins across Australian office and Asian real estate and the establishment of a new life sciences joint venture, Vita Partners, that has grown to about $2bn in funds under management in its first year.

“The exit of international construction builds on our progress to simplify Lendlease as we look to lower our risk profile and increase securityholder returns,” Lendlease CEO Tony Lombardo said. “As we further progress capital recycling initiatives, we remain focused on capital return, growth opportunities across our core business and the creation of value for securityholders.

Lendlease shares added 8c to $5.98 on Tuesday, though analysts remain concerned about its ability to turnaround.

“Near-term earnings uncertainty remains with lower development earnings in fiscal 2026,” Citi analysts said.