Lendlease gearing to surge on settlement delays from asset sales
Lendlease’s mid-year debt level will blow out to more than double its target for the year, after revealing that settlement delays in $1.2 billion worth of asset sales in the first half would push gearing into the mid to high 30 per cent range.
The ASX-listed developer and investor said last month that net debt would rise in the six months ending December, but did not specify a figure. It is still predicting gearing to return to its target of 15 per cent by the end of the full year in June.
But as the company announced a $400 million divestment of two retail and office asset stakes in Kuala Lumpur, it said the proceeds of those deals, along with $300 million in cash from the sale of a portfolio of assets to the UK’s Crown Estate, and the sale of its remaining 25.1 per cent stake in the Keyton Retirement Living asset, would only come in the second half.
“Delays in transaction timing … amounting to about $1.2 billion, areexpected to increase forecast group gearing by about 10 per cent at the first half of FY26, resulting in anticipated gearing in the mid to high 30 per cent range,” the company said on Monday.
The asset sales are part of a $4.5 billion portfolio of overseas assets the company has vowed to sell in line with a strategy that chief executive Tony Lombardo has pursued since May last year, when investors forced it to take on a faster turnaround to lift a flagging share price.
“To reach the 15 per cent gearing range by June, it has quite a bit of work to do to get there,” JPMorgan analyst Richard Jones told The Australian Financial Review on Monday.
“Gearing is going to be more elevated than anticipated. Partly that is timing related around the Crown Estates and TRX settlements, and partly it relies on significant further progress in divestment in the second half.”
Lendlease shares were little changed, ticking up just 1¢ to $5 after the announcement on Monday.
The company said it would receive $400 million from investor the Valiram family office for a 40 per cent interest in The Exchange TRX retail mall and its full 60 per cent interest in the adjacent tower in the Malaysian capital Kuala Lumpur.
After completion of the deal, Lendlease’s remaining 20 per cent stake in the retail centre, on a 6.9-hectare site it developed in the city’s financial district, will move into its investment arm.
The company also holds a 60 per cent interest in the residential land lots on the TRX site as well as a 60 per cent stake in a hotel on the site. The two assets have a combined book value of $200 million.
Lendlease holds the hotel with joint venture partner TRX City, and the pair have appointed advisers to sell it. Lendlease said it was also exploring options for the land lots.
The company said the receipt of $2 billion from sales by the end of the year to June would bring its gearing back down to its 15 per cent target range.
“We are pleased to announce further progress on our capital recycling initiatives, with $400 million to be released from the high-quality Exchange TRX retail mall and office assets,” Lombardo said.
“We continue to be highly active on capital recycling, with more than $3 billion of transactions under way for the second half of the financial year. This includes $2 billion of announced or advanced-stage capital recycling initiatives across our segments.”
