Lendlease chairman Michael Ullmer to exit after investor revolt

Former banker Michael Ullmer plans to leave the beleaguered developer in November, which could spark more unrest as big investors have flagged they want him to leave more quickly.

Lendlease outgoing chairman Michael Ullmer. Picture: Britta Campion/The Australian

Lendlease chairman Michael Ullmer has bowed to investor pressure and will leave the board of the embattled developer as the company embarks on a search for an external appointee to take the helm.

The former banker faced an unprecedented campaign by major investors to dislodge him as chairman on the back of dissatisfaction with the company’s performance and inability to turn around.

But in a surprise twist, he and another departing director Nicola Wakefield Evans will seek to stay on until the annual general meeting in November, against the wishes of large shareholders.

Mr Ullmer’s plans for an extended departure could spark further ructions as major shareholders, including its biggest Aware Super, which holds an 8.6 per cent stake, have made clear they want a much faster exit.

Aware Super, publicly joined the push for his exit this week, showing the increasing power which superannuation funds have in corporate Australia.

The company said a “formal process” to appoint a new Australia-based chair has been initiated. “We are looking to appoint an individual who has deep experience in real estate. The board renewal process will continue under the new chair in line with the future strategy and direction of the company,” it said in a statement.

Lendlease CEO Tony Lombardo at Barangaroo in Sydney, which was built by Lendlease. Picture: John Feder/The Australian

Lendlease is seeking to ensure that there is an orderly transition, which is behind the extended departure time frame, as a new chairman must be identified, recruited and put in place. The demand for an external appointment, with former Mirvac Group chairman John Mulcahy named as a potential successor, also adds to the delay.

But a board change had been in the wings since last year, when activist investors started agitating for strategy changes as the company’s shares slumped.

This was brought to a head last month when John Wylie’s Tanarra Capital called for a radical split of the company and called for new directors, flagging that it was willing to join the board.

Investment house Allan Gray has also publicly pushed for rapid board renewal, while David Di Pilla’s HMC Capital has also argued for a more rapid approach to turning the company around via major asset sales.

Allan Gray chief investment officer Simon Mawhinney flagged that the firm may seek changes at the executive level.:“I want someone to run that business well. I don’t think it’s been run well,” he told The Australian.

He noted chief executive Tony Lombardo’s long history with the business as chief financial officer and running the Asian business before heading up the company.

“As CEO, I actually don’t think he has made any noticeable missteps. I think he’s exited businesses. I think his biggest fault is he’s not moving fast enough,” Mr Mawhinney said, flagging that the pace of change must continue for him to retain support..

“So if he’s not happy to move fast, and he’s not happy to exit those geographies, then we want someone else who will do it. But if he is happy to do that, then we’re happy to back him.”

Mr Ullmer’s dramatic exit means that an incoming chairman will begin by reviewing the corporate strategy that Lendlease puts up on Monday, potentially delaying its implementation.

Ms Wakefield Evans has been winding down some major board involvement since being appointed to the Future Fund, and also left the Macquarie Group this year.

But the board departures cast a shadow over the group’s forthcoming strategy day.

Lendlease still faces the prospects of heavy writedowns on both its local projects and potential exits from offshore operations, including construction and development, at its strategy briefing.

The options on the table for Lendlease include a dramatic split of the company between its local and international arms, or potentially placing some offshore operations into run-off.

There are also concerns that selling off the international building and development arms will spark heavy write-downs if the company decides on a full exit. It also faces the prospect of only getting fire sale prices if it moves now, as global commercial property markets are at a low ebb.

Mr Ullmer joined the Lendlease board in December 2011 and was appointed chairman in November 2018.

Lendlease outgoing chair Michael Ullmer. Picture: Britta Campion/The Australian

Mr Ullmer’s tenure on the board was effectively in two halves. He came on to the board shortly after the company made a large and ultimately failed bet by shifting into engineering, which ultimately cost the company billions. The company also expanded in major offshore markets, growing its pipeline to over $100bn, but this has also failed to deliver.

After he became chairman the company’s trajectory was thrown off course by the coronavirus crisis which left it floundering as large scale urban development projects struggled and demand for commercial property dried up.

A rescue equity raising during the pandemic stabilised its balance sheet, but it has been unable to regain momentum, with a series of downgrades hitting it as it has sought to implement a turnaround strategy.

It has sold assets including its local housing unit to a Stockland venture and also sold down interests in offshore businesses including US military housing and most recently an Asian life sciences venture.

But its desire to both ramp up production to $8bn at a time when projects are stalling due to rising costs and hopes of growing to become a funds manager with a $70bn empire have also been set back partly by the industry-wide fall in property values.

The board could see further change if a new chairman comes into the company, as they put their own stamp on the company. A new chairman could also review the position of Mr Lombardo, who has attempted to speed up the turnaround of the company by switching to a more “capital-light” model.