Aware Super calls for rapid exit by Lendlease chairman Ullmer

The superannuation fund heavyweight has made surprising demands for change at the helm of the developer ahead of its crucial strategy day.

Lendlease chairman Michael Ullmer. Picture: Britta Campion

Superannuation heavyweight Aware Super has called for Lendlease chairman Michael Ullmer to swiftly depart the embattled company’s board and urged it to seek an external replacement.

The surprise intervention by the superannuation giant which holds a near 9 per cent stake in the developer adds to the upheaval facing the board ahead of a strategy update on May 27.

The fund is the company’s largest shareholder and its public demand marks a dramatic entry into the stoush over the once blue chip property developer’s future that has broken out between major shareholders and the board.

The developer has already committed to a board renewal process and Mr Ullmer is widely expected to reveal his departure next week, but Aware Super is looking to speed the time frame to much earlier than a mooted departure at this year’s annual general meeting.

Aware Super chief investment officer Damian Graham called out the need for a more rapid timetable for a new chairman to be brought in and put in place a strategy to turn the company around.

“As the largest shareholder in Lendlease, Aware Super has regularly communicated to the board its desire for strategic change and a refreshed approach to the leadership of the company,“ Mr Graham said. “We support much-needed board renewal with Aware Super having made clear its expectations for an accelerated transition to a new, independent and external chair.”

“This represents an opportune moment for an appointment from outside the company to champion the necessary organisational change, with strong strategic and commercial experience to lead the business,” he said.

Aware Super CIO Damian Graham says it supports ‘much-needed’ board renewal.

The nation’s superannuation funds are becoming more outspoken about the direction of the companies in which they have invested and their support is becoming critical to boards, particularly when they plunge into crisis or face takeover.

Lendlease has produced a disappointing performance over the past five years as its overseas operations have failed to deliver and it has taken heavy downgrades with its share price falling to around $6. Mr Ullmer joined the board in 2011 and became chairman in late 2018.

Aware Super is one of the largest industry super funds with $175bn of funds under management and usually has small stakes in companies across the share market.

It last month voted against both the re-election of Woodside Energy chair Richard Goyder and the company’s Climate Transition Action Plan as it had not made enough progress in the area.

Aware Super was also influential in determining the future of AGL Energy in 2022 when it was a top 10 shareholder and was also reported to be a supporter of Brookfield and EIG’s defeated $20bn takeover bid for Origin Energy.

Mr Graham backed Lendlease’s ability to come through the current instability and has a desire for it to once again rank as a top property company.

“On behalf of its members, Aware Super is a long-term investor in Lendlease and believes there is significant value to be unlocked for shareholders,” he said. “Aware Super remains in constructive engagement with the Lendlease board to ensure this much-needed strategic and cultural renewal is acted upon for the benefit of all shareholders.“

Lendlease has been under scrutiny from activist investors who have called for board changes, including for an external chairman to be brought in and even a break-up of the iconic company.

It has been targeted by activists including John Wiley’s Tanarra Capital and funds manager Allan Gray, who have sought radical changes, including a split of the company’s international and domestic operations.

Others, including substantial shareholder HMC Capital, are urging a more targeted strategy of selling non-core assets and returning capital to Australia. Aware Super has not entered into this debate and remains a partner of Lendlease locally and offshore in the property market.

Mr Graham said the fund “does not intend to comment further until the strategy day” and it has been pursuing a behind-the-scenes engagement with the company to convey its views. But is not insistent on getting a fresh lens on the strategy that is to be presented next week with an incoming chairman who is prepared to challenge it if necessary.

Both the company and the investors are dealing with a dramatically changed property landscape in the wake of the coronavirus crisis which has ripped through the value of traditional commercial assets and dampened demand for Lendlease’s signature urban renewal projects.

A new chairman would also be positioned to demand deeper cuts to non-core businesses and corporate overheads, with an appointment to potentially trigger departures of senior directors overlooked for the role.

While Aware Super is pursuing a constructive path a new chairman would also ratchet up pressure on chief executive Tony Lombardo, whose current strategy has failed to inspire investors amid a share price slump.

The superannuation fund would like to avoid further board disruption and is seen as unlikely to demand a seat. Its focus is on ensuring that Lendlease is on the path to a simple business model and its operations are capital light, rather than tied up on risky projects.

Lendlease was slugged with a $112m tax assessment this month that related to the sale of a stake in its retirement business to Dutch investors APG and it could face a further hit on its sales of interests in that business to Aware Super.

But the superannuation fund has not commented on the dispute between the Australian Taxation Office and Lendlease, which dates to before it invested in that business.

“The board renewal process is underway and well advanced; no decisions have been made and the market will be informed as appropriate,” a Lendlease spokesman said.