Further selldown of US Military Housing asset income stream22 May 2023
Lendlease today announced that it has sold a further 21 per cent interest in its US Military Housing asset management income stream to an existing partner for a cash consideration of A$126 million. The sale is expected to contribute ~A$75 million to core operating profit after tax for FY23.
This represents a cumulative sale of 62 per cent of Lendlease’s interest in its US Military Housing asset management income stream since FY22. Lendlease will retain 38 per cent of the asset management income stream as well as its existing ownership of the development, property and construction management rights, in addition to a ~A$200 million equity interest in the portfolio.
Global Chief Executive Officer and Managing Director, Tony Lombardo said, “This transaction demonstrates our ability to realise value from our portfolio to redeploy into higher growth opportunities, consistent with the execution of our strategy and ongoing capital management focus.”
As a result of the US Military Housing transaction, the FY23 Return on Invested Capital for the Investments segment is now expected to be towards the high end of the 6.0-7.5 per cent range; Lendlease previously guided towards the lower end of the range.
While the Group continues to make progress across its development portfolio, including maintaining WIP of ~A$18 billion, challenging market conditions, including a slowing in transactions and delayed settlements across the Australian Communities business, have impacted development earnings.
Accordingly, the FY23 Return on Invested Capital for the Development segment is now expected to be in the range of 2.50-3.25 per cent, which is below the previously indicated range of 4.0-6.0 per cent.
The expected FY23 EBITDA margin for the Construction segment is reaffirmed at the lower end of the previously indicated range of 1.5-2.5 per cent as the business continues to remain disciplined amidst inflationary headwinds.
The Group continues to forecast its FY23 year end gearing within the target range of 10-20 per cent.
Lendlease remains on track to achieve its FY24 targets of A$8 billion of completions and a Return on Equity at the lower end of the 8-10 per cent range.