Lendlease makes Asian play as chairman Michael Ullmer’s exit looms

The company’s future plans are set to be revealed at a strategy meeting at the end of month, with a renewal of the board on the agenda.

The future of Lendlease chairman Michael Ullmer could become clearer at the company’s strategy day later this month. Picture: Britta Campion

Embattled developer Lendlease is sticking to its earnings guidance ahead of a strategy day later this month, at which the future of chairman Michael Ullmer is expected to be revealed.

Lendlease has been under scrutiny from activist investors who have called for board changes, including for an external chairman to be brought in to lock in a new strategy.

The company kept its fiscal 2024 guidance at 7 per cent return on equity but this is conditional on a number of deals, including selling 12 housing estate projects to a Stockland venture.

The housing estate sale remains subject to regulatory approvals from the Australian Competition and Consumer Commission, which last month suspended its timeline, pending receiving more information from the parties.

Lendlease has been under pressure from a trio of activist investors to turn around its performance for months and has faced calls to split the company’s international arm when it was hit by a hefty tax bill last week.

The company says it is making progress on simplifying its business and on Friday said it had sold its life sciences interests in Asia to a newly established 50/50 joint venture with investment house Warburg Pincus.

Lendlease is a big player in the hot area but the deal also brings capital back to Australia as shareholders have demanded.

Mr Ullmer, a former deputy chief executive of NAB, is expected to reveal his departure plans at the strategy day on May 27, although an immediate exit is considered unlikely.

The company has been under pressure to renew its board and bring in outside expertise to help turn it around, and investors have also demanded accountability for its poor performance of the last five years.

But the board would want to ensure that a handover – even to an external appointment – was smooth and in keeping with its strategy, though it is yet to be announced.

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

The company is under pressure from Tanarra Capital and funds manager Allan Gray to consider a radical split of its international and domestic operations. Others, including 5 per cent shareholder HMC Capital, are urging a more targeted strategy to sell non-core assets and return capital to Australia.

News that the company is sticking it to its earnings comes in the face of a tough property environment where large commercial buildings are hard to get off the ground and selling major precincts is tough, particularly in international markets.

Lendlease has emphasised that it has strong businesses in areas like life sciences and build-to-rent globally. But it wants to change its model to become more like a fund manager and bring capital partners into its projects earlier in order to boost returns.

The property platform with Warbug Pincus is focused on the growing life sciences sector in Asia. Lendlease will transfer its current life sciences construction and development capabilities in Asia, together with its life sciences investments, to the venture.

The deal, valued at $S129m ($147m) demonstrates Lendlease’s established track record in the region and its ability to source and create future investments. The transaction is expected to realise about $66m in net cash proceeds.

Lendlease chief executive Tony Lombardo said the venture was “well-positioned to become the leading integrated life sciences real estate business in the region, offering compelling new investment opportunities to our investors”.

“This is another example of how we’re realising value from our existing operations, while further simplifying Lendlease to create a more focused company for security holders,” he said.