How Lendlease stitched up a deal with King Charles

Sadly, no. While The Crown Estate is officially owned by the King of England, it is an independent commercial vehicle managing a portfolio of $30 billion that has the explicit goal of returning all profits to the British government. We doubt Charlie even has a pigeonhole for his mail in the group’s fancy London headquarters.

But clearly, his company is an important player in the British property scene, with a very long history. And that made The Crown Estate an ideal partner for Lendlease to approach as it sought to extract itself from a complex deal covering six projects across various boroughs of London and in Birmingham.

Lombardo says if anyone is going to get a knighthood, it’s probably Dan Labbad, the chief executive of The Crown Estate, who is actually a former Lendlease executive, born and bred in Western Sydney.

In one way, negotiating with Labbad wasn’t easy, Lombardo says, because his former colleague knew plenty about Lendlease’s position. But ultimately it was helpful that Labbad understood the complex land management agreements covering the Lendlease projects.

Lombardo’s fear was that this complexity might mean it would take between three and five years for Lendlease to exit its UK development business. But under the terms of the joint venture with The Crown Estate, Lendlease gets $300 million for its 50 per cent share, it can sell another 25 per cent in three years’ time and it retains the option to participate in any of the six projects, which cover up to 26,000 residential units and 900,000 square metres of commercial space, via its investment management business.

Not too long ago, several investors wanted to lock Lombardo and the rest of the Lendlease board in the Tower of London, as the group’s share price sank under the weight of its own global ambitions. Now, following a series of asset sales – all done at, or above, book value, Lombardo is quick to point out – Lendlease has slashed the size of its international business and recycled $2.5 billion worth of capital. He’s now within spitting distance of his $2.8 billion capital recycling target for the 2025 financial year, with 40 days to go and three further sales deals under negotiation.

Lendlease shares edged higher on Monday, but are down about 11 per cent since Lombardo announced in late May 2024 that Lendlease would pull back from its global construction and development businesses and focus on its Australian operations.

Still, Lombardo says Lendlease is a different beast. Its employee numbers have fallen from about 7500 to 3700, its cost reduction project is running ahead of target and Lombardo says it is more focused on different ways to drive growth, including via its funds management business (where it has landed a new $1.2 billion mandate to manage Sydney office tower Aurora Place for South Korea’s National Pension Service) and even its construction business, which Lombardo says is emerging from a period of industry turmoil, is in good shape.

Lendlease remains a business in transition, and it will take some time to win back investors who’ve been burnt by its unique ability to shock the market with bad news. And as King Charles could tell Lombardo, there’s always going to be trouble in some part of the empire; high interest rates, the uncertainty facing global investors and the brutal turf war among Australia’s property fund managers.