Lendlease, the 68-year-old blue-chip global property developer and a mainstay of the ASX, has faced significant headwinds. The company specialises in creating places that regenerate and renew cities, including urban regeneration projects, residential communities, and infrastructure. Following activist investor pressure from figures like John Wylie and David Di Pilla, Lendlease unveiled its Capital Release Unit (CRU) in late May 2024. This initiative aimed to divest $4.5 billion in assets, intending to pay down debt, return capital to shareholders, and refocus its core investment, development, and construction units.
However, the CRU’s execution has reportedly faltered. Instead of releasing capital, the unit has absorbed it, contributing to worsening profitability and declining asset values over the past two years. This period also saw chief executive Tony Lombardo announce his departure, alongside other key staff. Lendlease shares plummeted last Friday to a 40-year low of $2.82, valuing the company below $2 billion, following its removal from the ASX 100 in March. Shareholders who invested believing in a CRU-driven turnaround have seen half their capital evaporate, contributing to a total of $5 billion in shareholder value lost over four years.
Market experts have voiced increasing apprehension. Barrenjoey recently downgraded its valuation of CRU assets to approximately $1.4 billion from a book value of $3.75 billion, forecasting nearly $1 billion in losses over three years due to accumulating expenses. Fund manager Allan Gray reduced its stake from 8.3 per cent to 7.2 per cent, citing a less attractive risk-reward profile. A Lendlease spokeswoman stated the company possesses “ample balance sheet flexibility” and $3.3 billion in available liquidity. Nevertheless, the ongoing leadership search and the necessity for prompt, successful CRU exits are seen as crucial for the company to regain market confidence and address concerns about its debt position.
