Lendlease Australia’s head of construction David Paterson has resigned to join industry rival Built ahead of an announcement next week when the $4.2bn Australian listed property group will tell investors that thousands of jobs will be axed.
The departure was revealed online by DataRoom on Wednesday, the same day Lendlease announced its chairman Michael Ullmer will leave the board in November after shareholder pressure following its difficult financial performance.
Mr Paterson is highly regarded in the industry and was appointed Lendlease construction head for Australia in 2021 in a role that has seen him responsible for overseeing the Lendlease Australian Building business.
He has over 30 years’ experience in the construction industry, 25 of which have been with Lendlease, with various roles across the business include managing director of Bovis Lendlease in Asia and general manager of Lendlease Building’s Northern Region Business.
Industry experts say his departure will be a major loss to the company that prides itself on high quality, large-scale projects such as Sydney’s Barangaroo precinct, London’s Elephant Park urban renewal project, Singapore’s Paya Lebar Quarter and New York’s Claremont Hall.
It comes as Lendlease on Monday is set to announce that thousands of jobs would be slashed from the business over time as it stages a retreat from construction in the UK, Europe and the US.
However, property development jobs in those geographies would also go, as would support staff in roles such as human resources, as the group remains under pressure to drive down costs and back away from unprofitable projects offshore.
As previously flagged by DataRoom, unprofitable projects would be placed into run off mode and sold down over time, and some are betting that the group offloads the assets at discounts to their ascribed values sooner rather than later to clear the books.
The job cuts would significantly reduce Lendlease’s 6000 to 7000-strong global workforce.
As well as Mr Ullmer, who has served on the Lendlease board since 2011, director Nicola Wakefield Evans would also step down at the AGM.
The company said in a statement on Wednesday that a formal process to appoint a new Australia-based chair had been initiated, and Lendlease said it was looking to appoint an individual “who has deep experience in real estate”.
The workforce reductions come after earlier cuts already made by Lendlease.
Last year it announced it was sacking 10 per cent of its global workforce, amounting to about 740 staff or 5 per cent of its workforce locally and 15 per cent offshore.
Lendlease chief executive Tony Lombardo has had a strategy in place since at least February to split out its poorly performing assets into a separate structure within the business and effectively places them into run-off or selldown mode.
But despite this, Mr Lombardo continues to face pressure from activist investors over performance, including John Wylie’s Tanarra, Allan Gray and David Di Pilla’s HMC Capital, which has 5.01 per cent.
It is believed who is best to run the business would be determined by the new chair.
The Lendlease share price, now at $6.04, has been trading at its lowest levels since 2009.
The shares traded at more than $20 in 2018.
Now a major equity raising, while unlikely to be announced on Monday, is seen as inevitable by the investment community in the next 18 months to pay for the redundancy and restructuring costs and to reduce debt.
The company denied a raise was on the cards in late 2022 when its share price was about $7.50.
But the thinking is that it could tap the market for cash next year under the leadership of a new chief executive, which may be put in place by a new chairman.
A new boss would want a fresh start by booking the restructuring costs up front and paying down debt at the start of their appointment.
Impairments related to good will for offshore assets may be announced on Monday topping $1bn, but restructuring and redundancy costs would likely be no more than $500m to $750m and would likely be accounted for over time.
Hurting the company has been tough industry conditions but also unprofitable development projects – particularly those offshore – as it has already been looks to wind down projects in offhshore markets, including construction in parts of the US, and has sold assets to pay down its $2.4bn of debt.
Macquarie Capital, Morgan Stanley and Gresham have been working on a plan to shape the direction of the company with 47 developments, an $8.3bn construction workbook, a $103bn global development pipeline and $48bn in funds and assets under management in office, residential, retail, industrial and social infrastructure.
Lendlease, which is broken down into three reporting units: development, construction and investments, made a $136m loss for the six months to December.
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