Australian construction and development giant Lendlease will retrench from development in the UK, Europe and the US and sell its overseas construction businesses.
In an announcement on the Australian Stock Exchange, the group with A$48 billion (£25 billion) of funds under management said it was taking "decisive actions to simplify its organisational structure and right size its cost base" by focusing on its domestic business and its international investments platform.
It said it will set up a capital release unit to recycle A$4.5 billion by completing transactions that are announced and underway, exiting international construction, and accelerating capital release from its non-Australian development projects and assets.
The international projects are mostly in the United States and United Kingdom. It will conclude most of the disposals in the next three years, ending a decades-long drive to be a major global construction group.
It said it would be "maximising value" from an orderly capital release from its overseas development projects while "maximising value and preserving key stakeholder relationships".
Once completed, various joint ventures are expected to contribute up to A$7.3 billion of funds under management to the investments segment.
Ultimately, Lendlease will be looking to bring in investment partners or sell out of a string of major projects where it is the developer in the UK, Europe and America.
A spokesman told CoStar News that historically Lendlease has funded vertical development costs entirely from its own balance sheet, for instance at Elephant Park in Southwark, but the "complexity and timescales involved in large urban regeneration means that this model is not sustainable at the scale at which we operate".
Lendlease will now be increasingly partnering with third-party investors at an asset, project or platform level to reduce the reliance on its balance sheet and accelerate the delivery of the pipeline.
Where land management agreements are to be revised, it will be aiming to work with partners to make sure it takes projects through planning and remediation to make sure it creates value, it said.
The spokesman added: "As the master developer we will work out ways to best maximise the projects with our master developer capabilities; and then work with our partners on the appropriate and right strategies moving forwards. As an example, that might involve land sales on those plots to bring in other developers to help develop them out."
In addition, he said if Lendlease were to take a vertical stake, it would be limited to no more than 25%. "It’s about realising the value for our partners and extracting that value for them and for us as fast as possible."
"On a case-by-case basis we will look to make sure we grow the value. And with our investors, at the right time, if we feel the investment or asset has stabilised well we will look to realise value for both Lendlease and our investor at the same time."
In the statement, it includes land and development for sale in the UK: Deptford Landings, a major mixed-use development in Lewisham, South East London, then as "Europe inventory", Elephant Park in Southwark, "Wandsworth" and Potato Wharf, a canal-side housing development in Manchester. In the US, it includes Hayes Point, San Francisco; Lakeshore East, Chicago; and Southbank, Chicago. It also states "Americas inventory (Fifth Avenue, Cirrus, The Reed, Claremont)".
Under joint ventures that will be completed to fulfil commitments to existing capital partners on in-progress projects, it includes the Stratford Cross office at the Queen Elizabeth Olympic Park in east London, and its partnership with Japan's Daiwa House on housebuilding at Elephant Park in Southwark. In the US it includes Java Street, New York; Habitat, Los Angeles; and Forum, Boston.
Under land value agreements where it intends to "satisfy various obligations such as planning and remediation to maximise value capture" the statement to the stock exchange includes: Thamesmead in London, where in partnership with Peabody it has been working on plans to develop 11,500 homes, Euston Station, where it is the government's master developer partner for a massive over-station development, and Silvertown, in east London where it is proposing a £5.1 billion mixed-use development with Starwood Capital. It also included the £1.9 billion Smithfield development in Birmingham, plus Stratford Cross (land), London, and High Road West, London, a £2 billion proposed development in Haringey where CoStar News revealed earlier this year it was mulling bringing in development partners.
Lendlease chairman Michael Ullmer said in a statement: “We recognise that our security price performance and securityholder returns have been poor as we have faced structural challenges and a prolonged market downturn. We need to take significant action at an accelerated pace to deliver value for our securityholders, capital partners and customers.
“Today we have announced the blueprint to position Lendlease for success – focusing on our core strengths and competitive advantages.
“We have thought very carefully about the necessary strategic refocus and made some tough decisions. I am confident that we have the right team and commitment to realise the value for our securityholders that is inherent in our business. And I am determined to dedicate my final months with this great company to ensure momentum builds toward the exciting future that lies ahead.”