New Lendlease chief Tony Lombardo hurries to find capital partner
Listed developer and builder Lendlease has been urged to speed the pace at which it brings in capital partners into its major projects under incoming chief executive Tony Lombardo.
The company, which announced him as successor to outgoing chief executive Steve McCann, has built up a $113bn pipeline but is under pressure to deliver it faster and needs external partners to realise profits more quickly.
Mr McCann’s exit at the end of May will mark the end of an expansionist era in which he pushed offshore but was also weighed down by a local move into engineering, which prompted heavy losses, leading the company to sell out of the area.
The appointment of Mr Lombardo, who won the internal race to succeed Mr McCann against local head Kylie Rampa and US boss Denis Hickey, as well as outside candidates, is likely to see it stick to its new strategy to lift development production to $8bn annually rather than make further changes.
But he will be under pressure from investors to speed up the development of the company’s pipeline and seek to bring in major funds as partners. The company has 22 major urbanisation projects across 10 global capitals, including London, Milan and New York.
The new chief executive will start on a package worth up to $7.5m, comprised of fixed pay of $1.8m, a short-term award of up to $2.5m and a long-term award of up to $3.2m.
His elevation could prompt a further shake-up of Lendlease’s executive ranks that are already being made over after chief financial officer Tarun Gupta left to take over from Mark Steinert as managing director of Stockland.
Mr Lombardo joined Lendlease in 2007 as group head of strategy and M&A and in 2011 was appointed as group CFO. In 2016 he was appointed CEO Asia, based in Singapore and led projects including Paya Lebar Quarter in Singapore and TRX in Malaysia, as well as the listing of a trust in Singapore.
Lendlease last year unveiled a fresh strategy to simplify its business and is now part-way through selling down assets to release $1bn of capital. It has sold its US telecommunications and solar farms units and locally is looking to sell down its services business and a stake in its retirement unit this year.
“Given the breadth of Lendlease’s operations, we believe continued simplification to allow focus on the group’s core offering would be beneficial,” Macquarie analysts Stuart McLean and Caleb Wheatley said.
Macquarie had been concerned about earnings visibility in coming years but said this was partly offset by the increased opportunities via the company’s development pipeline.
“An ability to increase earnings visibility on these profit events — potentially via the announcement of further programmatic partnerships — would be a positive,” Macquarie said.
“To achieve return on equity targets, Lendlease needs to increase profits from investor partnering, which against the current macroeconomic backdrop combined Lendlease’s exposure to dense urban regeneration projects will be difficult in the short term,” Macquarie said.
Mr McCann pushed back his planned retirement as he led the company through the pandemic and oversaw the finalisation of the talks between a Lendlease-backed consortium and the Victorian government over blowouts on the Melbourne Metro project.
Outgoing LendLease CEO Steve McCann. Picture: John Feder
Jefferies analysts Sholto Maconochie and Andrew Dodds dubbed Mr McCann’s long stint at the helm tumultuous but praised how he had positioned the company.
“We believe Steve leaves Lendlease in a strong position, having set it up as global leader in place making and large scale urbanisation projects. While some expected an external appointment we view Tony as a safe pair of hands and known quantity who can execute Lendlease’s improved and revised strategy,” they said.
Mr McCann’s exit was widely expected by the market and The Australian last year revealed that the race to succeed him was favouring internal candidates after external candidates, including Mirvac chief executive Susan Lloyd-Hurwitz, stayed in their roles.
Mr Lombardo’s appointment surprised some investors who have pushed for deeper changes at Lendlease but he is well-versed in the company’s long-dated urbanisation projects that offer returns measured over decades.
Lendlease chairman Michael Ullmer defended the appointment of an internal candidate, who was involved in buying the engineering business, saying the company had run a global process that included external figures who had also previously worked in the business.
The departing Mr McCann also pointed to the company’s “bench strength” of top executives.
The property boss steered Lendlease through the global financial crisis but stumbled by going into engineering with the purchase of Valemus in 2010 for $960m. The company sold the troubled business for just $160m last year and Jefferies estimated it cost Lendlease shareholders about $2bn.
