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Lendlease Braces for $340m Loss


Construction and development giant Lendlease is preparing for a full-year statutory loss in the range of $230 million to $340 million.

In an announcement to the ASX, the Sydney-headquartered company underscored the impacts of Covid-19 on the business with reduced productivity and delays felt across its development, construction and investment divisions.

Lendlease said its development unit had experienced delays across a number of active projects including at Melbourne Quarter, One Barangaroo in Sydney and International Quarter London along with increased cancellations across its communities business.

In an attempt to offset losses the group said it had agreed to sell a 25 per cent stake of One Sydney Harbour, its under-construction 72-storey residential tower in Barangaroo, to Mitsubishi Estate contributing $100 million in profit after tax.

Lendlease now expects core profit after tax to range between $50 million and $150 million, which includes a second half reduction in valuations of between $130 million and $160 million, equating to just over 1 per cent of the group’s $4 billion portfolio.

▲ The company said it had agreed to sell a 25 per cent stake of One Sydney Harbour.  Image: Renzo Piano
▲ The company said it had agreed to sell a 25 per cent stake of One Sydney Harbour. Image: Renzo Piano


Delays in commencements and sourcing new projects within the developer’s construction arm was most felt across its international offices, particularly in cities where mandated shutdowns were implemented.

Lendlease’s fund management platform, which includes co-investments in retirement living and other commercial property assets, is also expected to see losses ranging between $130 million and $160 million.

The company also revealed that its $5 billion shopping centre fund would also drag on profits as it continues to support struggling tenants.

Lendlease said it also faces $2 billion worth of redemptions from pension groups.

The company’s stricken engineering business, which is currently in the throes of being acquired by Spanish group Acciona for $180 million, has continued to weigh heavily on operational costs with total losses from restructuring expected to run between $450 and $550 million.

This included indemnities to cover existing contracts and the cost of finishing existing projects including the $11 billion Melbourne Metro Tunnel project, NorthConnex motorway in Sydney and Kingsford Smith Drive road project in Brisbane.

The sale of its engineering business to Acciona had been approved by the Foreign Investment Review Board although Lendlease said the deal would be finalised in early 2021 once all conditions were met within the agreed timeline.

Lendlease and its partners in the Cross Yarra Partnership consortium for the Melbourne Metro Tunnel Project are still working with the Victorian government on resolving cost blowouts.

The company also said the NorthConnex tunnel was on track to be operational in the coming months and the Kingsford Smith Drive project in Brisbane is scheduled to complete by the end of the year.

Related: From Barangaroo to Elephant Park: Inside Lendlease’s $112bn Pipeline

▲ The Cross Yarra Partnerships consortium responsible for the delivering the Melbourne Metro along with its contractors sought an extra $3 billion in funding from the government late last year.
▲ The Cross Yarra Partnerships consortium responsible for the delivering the Melbourne Metro along with its contractors sought an extra $3 billion in funding from the government late last year.


Lendlease said it will enter this financial year in a strong financial position with gearing at expected to be below 10 per cent and total liquidity above $5 billion.

In April Lendlease withdrew its forecasts and launched a $1.15 billion raising to fortify its balance sheet and cushion its pipeline from ongoing economic uncertainty.

Lendlease also secured a joint venture deal to develop the $4 billion Milano Santa Giulia project in Milan over 15 years as well as the signing up of a capital partner to develop another build-to-rent tower at its Elephant Park development in London.

It has also forged ahead with a mammoth $22 billion urban renewal project with tech giant Google in San Francisco, moving onto the next development phase.

“Covid-19 has had a material effect on the group for FY20,” it said.

“Our priorities have been to keep our people safe and protect our balance sheet.

“While the duration of the impacts of the pandemic are uncertain, the group is well positioned to execute the delivery of the global development pipeline and take advantage of other investment opportunities when the time is right.”

The firm also scrapped its final dividend for the fiscal year, declaring a final dividend of 30 cents a share last year.

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Article originally posted at: https://theurbandeveloper.com/articles/lendlease-braces-for-340m-loss