Lendlease Restocks Development Pipeline as Profit Declines

Lendlease has experienced a 30 per cent dip in net profit as development activity continues to track below pre-pandemic levels.

Lendlease, which will be headed up by Tony Lombardo from June, experienced a 26 per cent drop in total revenue to $4.93 billion.

Net after-tax profit dropped by 37 per cent to $196 million from $313 million a year earlier following a loss of $2 million for its non-core segment and a loss of $7 million from property revaluations in the investments segment.

The biggest decline came in its investments earnings, which dropped by almost two-thirds to $121 million from $300 million.

Gains were recorded in its construction earnings segment, up 3 per cent, aided by cost management and projects either nearing or reaching completion.

The group’s investment segment currently comprises $3.7 billion of investments, $38 billion in funds under management and $28 billion in assets under management.

On a brighter note, Lendlease’s balance sheet is looking in good shape, with gearing of 12.9 per cent and $4.7 billion of liquidity.

“The challenging operating conditions continued to affect each of the segments,” Lendlease chief executive Steve McCann said.

“However, the range of mitigating actions that were taken post the onset of the pandemic has enabled the Group to navigate this environment and take advantage of potential development and investment opportunities.”

The company’s urban development business—which it has been expanding globally through partnerships with new investors—was also hit by the pandemic, with development EBITDA earnings falling by one-third to $244 million from $322 million.

McCann said the weaker market environment provided Lendlease with an opportunity to secure new urbanisation projects alongside investment partners on attractive terms.

“Our core business is at a pivotal point, with a development pipeline of $110 billion and a growing number of major urbanisation projects in our international gateway cities, across US and European cities in particular.

“Our urbanisation pipeline is expected to create more than $50 billion of institutional grade assets for our investment partners and the group’s investments platform.

“We expect to more than double our current $38 billion in funds under management as this pipeline is delivered,” McCann said.

With backing from Aware Super, Lendlease in October made its first major regeneration play in New York, taking control of a Brooklyn site with plans for a $1 billion build-to-rent project.

The group also secured its first urbanisation project in Los Angeles at La Cienega Boulevard, where it has plans for an $800 million mixed-use development.

Lendlease and Super Aware, which are working on large apartment projects in Boston and Chicago, will continue to look for new opportunities to expand and diversify its activities across the US.

In September, Lendlease finalised a deal to sell its struggling engineering arm to Spanish conglomerate Acciona for $160 million after it had booked a loss of about $260 million in its pre-tax earnings over the second half of its 2020 financial year.