John Wylie takes aim at Lendlease chair Michael Ullmer in fresh boardroom attack

Activist shareholder Tanarra Capital has stepped up the pressure on the property major ahead of a critical briefing, demanding ’fresh thinking and leadership’.

Lendlease chairman Michael Ullmer. Picture: Britta Campion

John Wylie’s Tanarra Capital has taken aim at Lendlease chairman and long-term director Michael Ullmer, demanding the former bank executive retire later this year and that the board is overhauled to bring “fresh thinking and leadership” to the embattled property company.

The comments by Mr Wylie were made, in a letter to Lendlease’s shareholders, along with a 35-page slide presentation, ahead of the property company’s long-awaited strategy day next month.

They have been designed to ramp-up pressure on Lendlease and Mr Ullmer in particular, as Mr Wylie agitates for change and a carve-up of property play’s long underperforming international operations.

John Wylie heads up Tanarra Capital. Picture: Stuart McEvoy

The letter calls on Mr Ullmer to outline his intention to step down at the upcoming strategy day, with an orderly exit to follow at the annual meeting later this year.

But importantly he calls on the chairman to bring in independent outside talent as an “opportunity for a fresh start for Lendlease”.

Mr Wylie said the new chair should then be tasked with “leading a necessary process of board renewal” to oversee a new direction for the company.

Mr Wylie said he had several suggestions in respect of both chair and boardroom roles, although he declined to be specific.

Mr Ullmer, a former top bank executive with National Australia Bank and Commonwealth Bank, has been on the Lendlease board for 13 years and chairman for the past six.

Tanarra, an activist investor, has been heaping pressure on Lendlease over the past two years, arguing the company has been flagging under a string of management, including current boss Tony Lombardo.

As part of this Mr Wylie has pushed for a split of the company’s international businesses to focus on Australia where higher investment returns are generated.

Tanarra argues Lendlease’s expansion offshore is consuming the majority of capital at the expense of the Australian market where the returns are much ­higher. The international push has made Lendlease more ­complicated and more expensive to run, it tells investors.

There is no reason for Lendlease to operate in the global construction market, the presen­tation says, and refocusing the business on its core strengths should enable substantially better future performance.

“The era of Lendlease trying to be all things to all people in all parts of the world, with undisciplined capital allocation, must be at an end, now,” Mr Wylie said in the letter to investors.

Although Lendlease’s security price performance in recent years has been very poor, he noted the property company did have fundamental strengths.

Lendlease is under pressure from investors. Picture: AAP

This includes a “moat” business in Australian construction where there is a shortage of qualified head contractors for major projects.

It also has a “record of excellence in urban regeneration” as well as emerging opportunity in growth sectors such as build-to-rent, he said.

Tanarra is not the only activist circling Lendlease, with David Di Pilla’s HomeCo holding a stake via a fund.

Mr Di Pilla has resisted a wholesale demerger of the business but has also urged the company to sell select assets to improve returns.

Lendlease’s Mr Ullmer said in a statement that the board renewal process was under way and “well advanced”.

However, he said no decisions had been made and the market would be informed when ­appropriate.

“Like many listed companies, our register is composed of a range of securityholders each with their own views and investment objectives,” Mr Ullmer said. “We regularly engage with all securityholders and welcome their feedback”.

The investor presentation also takes aim at the remuneration package awarded to Mr Lombardo, with increasing performance rights granted in each of the past three years at a progressively lower hurdle price.

Mr Wylie’s push comes at a time when Lendlease is vulnerable. The property play is trying to evolve from a risky builder into an investment and funds management operation. However, investors have been pushing it to move faster.

Mr Lombardo is targeting $70bn in funds under management within the next two years, up from $48bn at present.

Lendlease’s long-awaited update to investors on its strategy next month comes after it fell to an unexpected $136m interim loss in February, after it was hit by property valuations and redundancy costs as it looks to slim down its sprawling empire.

The loss represented another blow to Lendlease’s shares, which are down more than 14 per cent so far this year. Over three years Lendlease lags key rivals in the listed property and development sector, with total returns down nearly 50 per cent.

Mr Lombardo is part way through a massive cost-cutting exercise across Lendlease, including slashing the global workforce by 10 per cent. He has also raised $2.7bn through asset sales, including military housing projects and residential developments. Analysts believe writedowns are likely across several of Lendlease’s international projects to help reset returns.