Speculation is mounting that a major equity raising could be looming for Lendlease in the new year, with sources in the market betting that writedowns on some of its properties are on their way.
A Lendlease spokesman categorically denied any raising was on the cards.
Yet various sources on the market are becoming increasingly nervous about the outlook for the business, based on the macro economic environment, and a number of its investors are understood to be of the view that the company will need additional equity.
Lendlease has a $120bn pipeline of developments that need to be funded, including a $1.2bn office development above Victoria Cross station in North Sydney, still to be leased.
Lendlease said it was confident that it could fund its business plans through capital generated organically through retained earnings, combined with “incremental debt”.
Its debt level is about 12 per cent but should the value of its property portfolio decrease for the six months to December, some predict the debt level could increase by more than 15 per cent.
A market expert said a debt level of 20 per cent would be too high for Lendlease, a builder as well as a developer and investor.
One view is that a raise of between $500m to $1bn could be on the cards down the track with shares sold at between $4 and $5.
The Lendlease share price is trading at levels it was at around 2012 after recently downgrading earnings and warning of a challenging outlook.
The company’s shares closed at $7.48, taking its market value to $5.15bn, down from more than $10 at the start of the year.
Lendlease’s Victoria Cross development in North Sydney consists of 58,000sqm of office and retail space over 40 storeys, scheduled to be completed in the 2024 financial year.
The company has already sold down 20 per cent of the building for $120m to one of its own funds during 2019.
An additional concern for Lendlease will be that investors in the company’s wholesale and retail funds will be on the back food and be seeking redemptions.
Lendlease has $40bn of funds under management and has a goal of growing it to about $70bn by 2026.
Last week, the Wall Street Journal reported that Blackstone’s shares took a major hit after the investing giant’s real-estate fund aimed at wealthy individuals said it would limit redemptions.
Blackstone Real Estate Income Trust (BREIT) said on Thursday that the amount of withdrawals requested in October exceeded its monthly limit of 2 per cent of its net-asset value and its quarterly threshold of 5 per cent.
BREIT has houses and industrial properties in the United States and sold properties at the same time as the redemption requests, with $US700m of proceeds that can be used for the redemptions.
Earlier, The Australian reported Lendlease is also facing questions about its ability to fund and complete its large long-term urban regeneration projects as global economies, including Britain where it has a large exposure, head into recession.
Lendlease chief executive Tony Lombardo said at its recent annual general meeting that the company would complete about $4.5bn of work and was on track to deliver more than $8b of projects in 2024.
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