Expectations are starting to mount of a full sale of Lendlease’s communities business, as the company bets on good sale results of non-core assets to achieve its earnings targets.
There are suggestions that the group is confident of achieving a sale result where it achieves a price higher than book value.
Lendlease has the business on the books at $1bn.
Some anticipate a sale at slightly above book value.
Earlier, the suggestion was that Lendlease would sell only part of the business, which meant groups such as Stockland, which wanted to buy the unit as a whole, were no longer around the hoop.
Now the talk is that Stockland remains the most promising buyer, but Thai investor Supalai is there for at least a stake, sources say. Daiwa House Group is not currently thought to be in the mix.
Stockland, the nation’s largest listed residential developer, has been keen to strengthen its position in the residential development market at a time when the country faces a housing shortage with growing immigration.
Yet slowing up development is government approvals, and gaining sites in the right locations, where demand is strong, such as state capital cities, is always the challenge.
Any buyer considering an acquisition will need to factor in that some of the Lendlease projects in its communities unit are development management contracts, rather than those where the group itself owns the land.
Lendlease said in its results this month that its communities business generated $142m of earnings before interest, tax, depreciation and amortisation, with a pipeline of 42,100 lots worth $16bn.
Lendlease had 2253 settlements for the year to June, up 52 per cent from the previous corresponding year, while it sold 1765 lots, a result that was down 43 per cent with rising interest rates.
The Lendlease Communities business is on offer through investment bank Macquarie Capital. Activist shareholders on its register – among them HMC Capital, Tanarra and Allan Gray – will be placing pressure on the group to boost performance.
For the year to June, Lendlease made a $232m loss as it posted a $295m provision linked to retrospective UK government action on residential buildings and as its property values declined by about 7 per cent, or $175m.
Lendlease said it was on track to meet the lower end of its return on equity target of 8-10 per cent for the 2024 fiscal year.
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