Real estate giant Lendlease has signalled a further retreat from the construction market in the US after earlier announcing it would exit some segments.
The company told staff in December it would no longer be bidding for new construction work in key areas of the US, namely Chicago, and northern California, say sources.
This is after Lendlease chief executive Tony Lombardo made comments at its full-year results briefing in August that it was backing away from apartment construction for third parties in the US market, given the longer tail risk, (although it remains in the build-to-rent segment) and will no longer build external projects below $150m.
Lendlease has had a mixed path on US projects, what with Google walking away from a deal to develop $23.3bn worth of projects in the San Francisco Bay area and its Van Ness office tower in San Francisco that has struggled to find tenants.
It has already sold a 60 per cent stake of revenue from its military housing unit.
Market watchers say that a retreat from third party construction over time in the US would be well received by its investors, which include high-profile investment bankers such as John Wylie and David Di Pilla.
It would enable it to simplify its business focus and target more profitable areas.
On the US east coast, Lendlease is said to have a solid backlog of work, largely with established customers in healthcare, life sciences and multifamily projects.
But the US construction business is likely to be the subject of questioning when the group reports its half-year results on February 19.
Already, in an effort to reduce debt, Lendlease has made sweeping job cuts and has placed a raft of assets on the market, announcing in December a sale of its Australian communities business to Stockland and Supalai for almost $1.1bn.
One of the areas of focus has been its Victoria Cross building above the train station at North Sydney, which is yet to be fully leased.
One option could be for Lendlease to transfer its headquarters to the building, vacating the space it occupies in Sydney’s Barangaroo office complex where it could lease out to another tenant.
For the year to June, Lendlease generated about $7.2bn of revenue from construction, up 9 per cent from the previous corresponding year.
The Americas business saw growth in new work to $2.1bn.
Lendlease had $1.1bn of net debt at June.
Shares on Friday closed at $7.33 with its market value at $5bn.
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