Lend Lease profit boost after UK sale

One of the last remaining assets of the Stuart Hornery-era of Lend Lease, the Bluewater shopping centre in Kent, outside London, has been sold for $1 billion.

The centre was regarded as a breakthrough deal for Lend Lease nearly two decades ago, at the time it forged the property group’s path into Britain.

Lend Lease has sold its 33 per cent stake in the mall to UK Land Securities, together with surrounding land and the management rights. The funds will be used to repay debt and to boost the group’s $38 billion global development pipeline.

Lend Lease’s chief executive, Steve McCann, said the sale process started a year ago, but gained momentum in the past month and was unexpectedly concluded before June 30. As a result, the windfall would be included in the 2014 profits, bumping the underlying earnings by 45 per cent to between $810-$830 million for the year.

However, market reaction was negative as investors were concerned that some transactional profits had been deferred and could be lower in coming years.

The group bought the old chalk quarry in 1995 and transformed it into one of the top performing retail assets in Europe. The site opened in 1999 and was anchored by three department stores and over 300 stores and was considered the first non-high street mall outside London.

As part of a review of the business, Lend Lease will also sell the Crosby apartment portfolio in the UK, valued at $29 million post tax, and will review an exit from the PFI Global Renewables Project in Lancashire, worth $16 million post tax.

”Lend Lease also intends to restructure and potentially exit three communities projects in Australia worth about $40 million post tax, but details will be announced at the full year result in August,” Mr McCann said.

He said that Lend Lease’s results traditionally have about 20 per cent of transactional costs and this year, that would be accounted for by the Bluewater sale. Other sales of assets and co-investments will be in the 2015 and 2016 year results.

”Lend Lease remains comfortable with the financial year 2015 expectations of net profit after tax of between $600 to $620 million,” Mr McCann said.

This will include the profits made from the sale of apartments at Barangaroo and the new Darling Square.

Macquarie Equities said while the Bluewater sale price is ahead of expectation, ”we believe the profit masks underlying weakness in 2014 financial year”.

Amid the Bluewater sale, Lend Lease has been chosen as a joint venture partner to develop the $US8 billion ($A8.5 billion) Tun Razak Exchange, Kuala Lumpur’s new financial district.

The development will include Grade A office space, residential, hospitality, retail, leisure and many cultural offerings.