Lendlease Group · ASX:LLC
Lendlease — Investor Presentation (2000)
47 slides from Lendlease's investor presentation, 2000
Slide 1: A unique global integrated Real Estate Business
A unique global integrated Real Estate Business 11 • Davos prediction - in 20 years’ time 80% of the world’s business would be carried out by global corporations. • And the global competitors in funds management are significant, which was one of the reasons we sold MLC. • But in Real Estate there ar
Slide 2: Lend Lease Positioning
Lend Lease Positioning • We are a specialist global solutions provider in Real Estate • We have significant implementation skills • We seek to provide services right across the value chain • We seek to share in the value we create 22 • We are not a REIT, a broker or a pure developer or builder. • We
Slide 3: Real Estate as an Asset Class
Real Estate as an Asset Class • Produces growing income to meet the needs of ageing populations • Markets becoming more sophisticated and more disciplined with growing securitisation worldwide • Still remains a fragmented local industry • Clients’ needs are evolving fast 33 • Ageing populations and
Slide 4: Lend Lease Integrated Real Estate Businesses
Lend Lease 3 Integrated Real Estate Businesses: • Bovis Lend Lease: Project Management & Construction • Lend Lease Development • Lend Lease Real Estate Investments (REI) 44 • BLL is a world class business and ranks #8 in the 2000 Engineering News Record Top 225 International Contractors. • LL Develo
Slide 5: Project Management business introduction
55 • I am going to cover the three elements that make up our unique platform - the Project Management business, the Development business, and the Real Estate funds management business - and in each show you the extra power that is added through having an integrated offering. First, let’s look at Pro
Slide 6: Rationale for Acquisition
Rationale for Acquisition • Truly global business, a world leader, operates in over 40 countries • No. 1 in UK management construction • Ranked No. 1 construction manager and No. 2 general contractor in Americas • Complementary strengths and locations • Similar cultures. Organizations have worked we
Slide 7: Major Clients
Major Clients 77 • And these are some of those clients. 7
Slide 8: Benefits of combining Bovis and Lend Lease Projects
Benefits of combining Bovis and Lend Lease Projects • Advances Integrated Global Real Estate Group strategy significantly • Balances the employee distribution globally: - Asia Pacific 2,100 - Americas 2,300 - Europe 2,600 • Provides infrastructure to support Lend Lease Real Estate globally • Global
Slide 9: Backlog
Backlog Gross Profit At 30.6.2000 A$M Asia Pacific 70 Americas 181 Europe 231 482 A$B Revenue 7.8 99 • The committed backlog revenue at 30 June 2000 was $7.8B, versus $2.1B at 30 June 1999. • Backlog profit is the gross profit expected to be earned on committed contracts. • These profits are before
Slide 10: Bovis = Globalisation + Diversification
Bovis = Globalisation + Diversification % Revenue Bovis LL1 Pre-existing business2 Asia Pacific 24 99 Americas 50 - Europe 26 1 100 100 1 Annualises 8 months’ Bovis contribution 2 1999 revenues 10 10 • The Bovis acquisition has dramatically diversified the revenue stream from the Project Management
Slide 11: Operating Profit after Tax
Operating Profit after Tax June 2000 A$M Reported Including interest on surplus working capital Asia Pacific 38 47 Americas 11 14 Europe 7 10 56 71 11 11 • The Bovis Lend Lease result only includes 8 months of Bovis, and is after integration and establishment costs. • In addition, BLL generates surp
Slide 12: Bovis Lend Lease Work Profile
Bovis Lend Lease Work Profile % Earnings Now 2004 target PFI/Integrated 13 25 Client Alliances 16 25 Risk/Guaranteed, Maximum Price Work 35 25 Fee Work 36 25 12 12 • We now have the platform to grow our profitability through changing our work profile. • We will do this: - by focusing on growth oppor
Slide 13: Integrated Group Model
Integrated Group Model Lend Lease Integrated low De Real Estate al f al f SOLUTIONS low De •PFI •LL Actus •BOT Bovis Lend Lease Lend Lease REI Project Management Financing and Implementation Cross selling collaboration service opportunities • Limited disciplined offerings • Cherry pick the best oppo
Slide 14: PFI/BOT Projects
PFI/BOT Projects • Current project positions exceed A$1.3B • Minimal equity requirements • Long term positions • Partnering with key players/clients • Multiple service deliveries • Multiple income streams • Control of entire process 14 14 • Private Finance Initiatives (PFIs) and Build Operate Transf
Slide 15: PFI/BOT Projects Current Project Positions
PFI/BOT Projects Current Project Positions Project Type Country Status Completed Value A$ Da Chang Water China Completed 130 Calderdale Hospital UK In construction 190 Worcester Hospital UK In construction 205 Treasury Building Office UK In construction 280 Hexham Hospital UK Preferred 60 Fort Hood
Slide 16: PFI/BOT Projects: Military Housing Program
PFI/BOT Projects Lend Lease Actus/Military Housing Military Housing Program • Army, Navy/Marines, Airforce • Privatization of housing on military bases in USA • A$30B program, 300,000 housing units/ 60% need repairs • Housing is a major reason for loss of servicemen and women 16 16 • The U.S. Army i
Slide 17: Lend Lease Actus/Fort Hood Example
PFI/BOT Lend Lease Actus/Fort Hood Example • Largest US military installation • 1/3 of Army manpower and hardware • Army base comprising 214,000 acres at Killeen, Texas • 42,000 military personnel + families + civilians • 5922 sets of family quarters • Dates back to 1940s 17 17 • Lend Lease Actus ha
Slide 18: Fort Hood Project Requirements
PFI/BOT Lend Lease Actus/Fort Hood Example Project Requirements • 840 units to be replaced and 4,240 renovated • 18 month waiting list • 98% occupancy • Partnership relationship with Army • Only minor equity from LL Actus • 50 year development budget over A$3B • Initial project budget over A$440M 18
Slide 19: Fort Hood: Our Responsibility
PFI/BOT Lend Lease Actus/Fort Hood Example Our Responsibility • Client/program manager • Development manager • Design and construction (Bovis Lend Lease) • Arrange finance (debt and equity - Lend Lease Real Estate Investments) • Asset manager (Lend Lease Apartments) • Property repair and maintenance
Slide 20: 4 Year Growth
Grow the Established Business Clients & Build the Alliances Growing Regions Base Business Global Sectors 4 Year Growth Integrated Real Estate e-business u Consulting u Platform u PFI/BOT u New Way 20 20 To conclude on Bovis Lend Lease: • We have a global business and a global brand, and we have the
Slide 21: Development as second core business
21 21 • Development is the second core business in our integrated real estate business model. • Our strategy in future is to primarily use third party capital for development, in partnership with LL shareholders’ funds used to secure potential opportunities. • Our Development business has a local fo
Slide 22: Property Development Operating Profit after Tax
Property Development Operating Profit after Tax A$M 2000 1999 Australia (50.2) 9.9 North America (4.9) (2.9) Asia 3.5 (23.6) Europe 62.9 144.5 11.3 127.9 22 22 • We have skills and a great reputation in development: - in Australia look at the Olympic Village, Jacksons Landing or Aurora Place - in th
Slide 23: Major Development Projects Australia
Major Development Projects Australia Location Funding Stage Retail Shopping Centres Development Upgrades GPT Long Term Land & Residential Staged Developments North Lakes, SE Queensland With JV partner Newington (inc. Olympic Village), Sydney With JV partner Jacksons Landing, Pyrmont, Sydney With JV
Slide 24: Olympic Village, Sydney
Olympic Village, Sydney 24 24 • One example of a major residential development is the Olympic Village where 75% of the units released to the market in the first two stages have been sold. And the feedback from the athletes and their team managements about the Village has been fantastic. • These are
Slide 25: Major Development Projects UK/Europe
Major Development Projects UK/Europe Location Funding Stage Solihull UK Retail Partnership Norwich Preliminary Stage Shell House Preliminary Stage Milton Keynes Prudential/Hermes Leeds USS Pension Fund Amsterdam Preliminary Stage TresAguas, Madrid Preliminary Stage 25 25 • We have repositioned our E
Slide 26: Major Development Projects US/Asia
Major Development Projects US/Asia Location Funding Stage US One North Wacker, Chicago JV between The John Buck Company /Value Enhancement Fund IV Lincoln Square, Seattle Value Enhancement Fund IV Piers 30 & 32, San Francisco Preliminary Stage Asia Taipei Financial Centre Client Admiralty Industrial
Slide 27: Real estate funds management business - REI
27 27 • Now I would like to turn to our real estate funds management business - REI. • In our global REI business our objective is to provide superior returns for clients in the real estate asset class, globally. 27
Slide 28: Unique Platform - Lend Lease Real Estate Investments
Unique Platform - Lend Lease Real Estate Investments • Financial services company focused on real estate • Capabilities in all property sectors, debt and equity investments • Operations in the public/private markets-all quadrants • Offices in more than 40 cities on five continents • Core, enhanced,
Slide 29: Market Leadership
Lend Lease Real Estate Investments Market Leadership • Institutional Investment Management: #1 U.S. manager of tax-exempt assets in real estate equity • CapMark Services: #2 commercial mortgage loan servicer • HCI: One of the largest sponsors and market leaders in tax credit investing • HFF: #1 U.S.
Slide 30: Funds under Management / Loans under Servicing
Real Estate Investments Funds under Management/ Loans under Servicing Local Currency Billions Funds under Management June 2000 June 1999 US USD 40.0 23.7 +73% Australia AUD 10.0 8.7 +15% Asia USD 0.5 0.2 +150% Europe GBP 1.0 0.6 +67% AUD 81.6 46.9 +74% Loans under Servicing USD 55.8 7.2 +675% 30 30
Slide 31: Performance of U.S. REI Funds - Returns
Performance of U.S. REI Funds - Returns (% p.a.) Calendar 1999 1998 1997 Private Markets Prime Property Fund (Core) 13.4 18.8 14.3 NCREIF Property Index 11.4 16.3 13.9 Value Enhancement Funds • VEF I 70.6 24.3 36.3 • VEF II 14.8 12.4 31.0 • VEF III 15.6 - - Public Markets -0.1 -12.3 24.7 Lend Lease
Slide 32: Lend Lease Rosen Investment Performance
Lend Lease Rosen Investment Performance Superior results with low levels of risk 50% 37.2% 37.0% 30% 24.7% 22.9% 21.2% 17.8% 19.7% 14.2% 10.4% 12.2% 7.1% 10% 2.7% -0.1% -2.6% -10% -12.3% -17.0% -30% Annualized 1994 1995 1996 1997 1998 1999 2000 YTD Return (SI) Total Return Strategy (Composite) Wilsh
Slide 33: Real Estate Investments Product Positioning
Real Estate Investments - Global OPPORTUNISTIC Public Private Product Positioning Œ International Distressed Debt Fund Debt Œ Global • US ENHANCED Equity • LL Rosen Select Equity Œ Lend Lease Global Properties Public Private Ž Asia • Europe • LL Hyperion CMBS • LL Fleet Mezzanine Fund Debt • LL Rose
Slide 34: The Shareholder Value Chain
The Shareholder Value Chain 34 34 • Rather than look at all aspects of our REI business, I thought I would focus on a few examples where you can see the benefits of our integrated offering: - both in terms of the value we can add for clients - and in terms of the multiple income streams we can gener
Slide 35: U.S. Multifamily Asset Class
U.S. Multifamily Asset Class • Highest average absolute and risk adjusted returns of any major property type in NCREIF • Outlook for 2000 and beyond is bright • Becoming a focus for institutional investments • Lend Lease significant expertise in this asset class 35 35 • My first example concerns the
Slide 36: The Multifamily Chain
Lend Lease Real Estate Investments The Multifamily Chain Provides Provides Provides Provides Provides Provides Developer Support for Permanent Loan Investors for Asset Relationships Construction Financing - Servicing & Equity Capital Management & Deal Flow Loans Fannie Mae Property Freddie Mac Manag
Slide 37: The Debt Value Chain
Lend Lease Real Estate Investments The Debt Value Chain Manages Asset Resolves Originate Services Lender/Investor Manages Problem Loans Loans Capital Loans Loans Institutional Debt Advisory Holliday Fenoglio Fowler Lend Lease Asset Management Lend Lease Mortgage Capital CapMark Services 37 37 • Like
Slide 38: The Integrated Real Estate Value Chain
Lend Lease Real Estate Investments The Integrated Real Estate Value Chain Provide Provides Provide Provides Provides Provides Provides Developer Equity Project Permanent Mezzanine Asset Loan Relationship Capital Management Financing Financing Management Servicing Institutional Institutional Bovis Ca
Slide 39: REI Operating Profit after Tax
REI Operating Profit after Tax A$ 2000 1999 Australia 14.2 8.0 North America 88.9 61.7 Asia 4.3 (5.5) Europe 29.8 5.7 Capital Services 14.4 8.0 151.6 77.9 +95% 39 39 • REI profit was up significantly in the last year with the acquisitions made, but our first full year for all of them is this year. •
Slide 40: Company Financials
Company Financials 40 40 40
Slide 41: Results June 2000
Results 30 June 2000 Operating Profit after Tax $432M +2.8% Extraordinary Profit after Tax $3,112M Total Profit after Tax $3,544M Earnings per Share (excl. +2.5% Extraordinary Item) 84.7cps Dividends per Share 64 cps +6.7% 41 41 • In the year to 30 June 2000 we earned an after tax operating profit o
Slide 42: Capital Restructure
Capital Restructure • A$1.8B share buy-back completed • Consequently expect lower absolute profit next year over reduced number of shares • Plenty of reinvestment opportunities for funds retained • Transformation period of 12-18 months 42 42 • We have spent around $1.8B buying back 17% of our share
Slide 43: Transformation of Lend Lease
Transformation of Lend Lease A$M June 1999 June 2000 Divestments Financial Services 4,597 Acquisitions FlexiPlan 20 Advance Assurance 24 CEF Life 250 Godfrey Pembroke 40 Bovis 752 Boston Financial 281 5 AMRESCO businesses 436 Project Consultants Inc. 4 1,807 Market Capitalisation 10,457 10,915 Net C
Slide 44: Moving to Optimal Capital Structure
Moving to Optimal Capital Structure $M June Dec 2000 1999 Cash 3,484 615 Borrowings (1,046) (2,034) Net Cash 2,438 (1,419) Proposed share buy-back (1,800) Tax on sale of MLC (545) Pro Forma Net Cash Position 93 • Strong cash position and operating cashflows create significant debt raising capacity -
Slide 45: Reduced Franking Credits
Reduced Franking Credits • Geographic mix of earnings: increasingly offshore sourced due to greater growth opportunities 2001 2000 1996 % % % Forecast Actual Actual Australia(1)(2) 25 60 88 Non Australian 75 40 12 100% 100% 100% (1) Excludes Group financing and amortisation costs (2) Excludes Westpa
Slide 46: Change to Dividend Policy
Change to Dividend Policy • Transition period 12 months • Reduce dividend pay-out ratio to approximately 50% • May include significant component of unfranked dividend • Thereafter move to regime of only paying franked dividends supplemented by buy-back programs 46 46 • It is inefficient to continue
Slide 47: Summary and Questions
47 47 • To summarise: - There has been a very significant transformation of Lend Lease in the last 12 months. - We now have in place the platforms and the investment product range. - And we have the research and the network that sits behind that. - We offer clients added value because of the integra