Lendlease could sell other assets like it has done with its military housing business in the US to drive down its debt and retain more cash on its balance sheet.
Macquarie analysts believe the developer and real estate investor would need to realise $650m through asset sales to bring its leverage back to 20 per cent by 2026 and would likely be a key strategy for the group ahead.
The group’s recent move to sell a 28 per cent stake in its military housing business could result in a $110m net profit contribution if it is sold above book value, according to the analysts.
The analysts say reducing Lendlease’s payout ratio to between 10 and 30 per cent would provide additional flexibility in addition to asset sales.
It comes at a time that Lendlease is moving on its capital-intensive development and investment ambitions.
For the six months to December, the real estate group reported a $264m loss as it restructured the business and stepped up new developments within its $112bn pipeline.
Lendlease has already taken on a financial partner for its US military housing unit, as announced in February, buying 28 per cent of the business.
Last year in April, Lendlease announced it had secured a $1.1bn loan to invest in improvements to its military housing communities.
The latest selldown is expected to close by April 2022, at which time Lendlease’s investment partner will be named.
Lendlease has outlined $3bn of additional capital will be spent by the 2026 financial year to achieve its targets, with a further $800m of capital required for the wind-down of engineering.
The group’s debt level is currently 12 per cent, and it wants it to remain between 10 and 20 per cent.
Analysts believe it could be over 20 per cent without the company having to actively manage the balance sheet.
As well as asset sales, it could decrease the payout ratio of about 40 to 60 per cent to 10 to 30 per cent.
They say $800m of asset sales is less than 4 per cent earnings per share dilutive.
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