In terms of what the result will be for the corporation's various business units--and specifically Holliday Fenoglio Fowler, "We're in the process of looking at Holliday Fenoglio and how that process will be completed," says spokesperson Jonathan Miller. But GlobeSt.com has learned that, much as we reported in November 2002, a management buyout of the unit is still the dominant option. Left unclear by the Sydney-based firm's official statement is what will happen to the global fund. Our source says they may keep it since it was a profitable entity.

Miller says no timeframe has been decided for the exits, but that the pace has picked up since strategizing began last summer. Yet, one source has stated that, "June 30 is year end. Draw your own conclusions."

Miller also notes that Lend Lease is still working with Morgan Stanley regarding the takeover of equity business. "Over a period of time, all businesses will be exited," he adds.

"Our discussions with Morgan Stanley regarding the US Real Estate Equity Advisory business continue but are now focused on our ultimate strategic objective to exit the business over time," reported Greg Clarke, Lend Lease managing director and CEO, in the prepared statement. "Over the outcome of those discussions, we do not expect to be writing back value upon completion of any agreement with them."

The announcement follows completion of a year-long review of Lend Lease's real estate investment management business strategy. That review determined a number of issues including too many disconnected businesses in the US that created complexity and dispersed management focus; virtually no synergies achievable between the US REI businesses and other parts of Lend Lease and an unacceptably poor outlook for US REI for the next few years at least.

Other factors included the lack of scale in Europe and little reward for effort--operational earnings continue to be offset by new business costs and are likely to continue to be a drag on earnings for too long.

"The essential business decisions have been made to build on our successes and deal conclusively with our failures," said Clarke. "The group's interests are best served by adopting simpler, lower-cost business strategies for each of the major markets, rather than attempting to operate a universal strategy irrespective of corporate resources, and differing market and regulatory conditions in the various regions."

Going forward, the only US operations that will remain will be Bovis Lend Lease and the firm's military housing operation (Actus). In Asia Pacific, Lend Lease will focus on real estate funds management. Bovis Lend Lease will also continue as a part of the corporation in the UK and Europe, along with its military housing, retail and urban regeneration businesses.

"The feeling is that these businesses are established and will continue to be a successful part of our real estate solutions," Miller says.

Lend Lease will take a further write-down in respect of the REI businesses up to US$300 million (Australian $462 million) after tax. This includes the US$30 million loss on the sale of CapMark and other real estate debt businesses previously announced. The write-down estimates remain subject to audit review. The company has conducted an extensive review of its dividend policy over the past six months. Given the company's continuing strong cash flow position, Lend Lease has adopted a dividend payout ratio of 60-80% from the 2003 final dividend to be paid in September. The company also announced commencement of an on-market share buyback of up to 10% of issued capital. Today, Moody's Investors Service placed a Baa2 long-term rating of Lend Lease on review for possible downgrade.

Instant Insights /

GlobeSt.com EXCLUSIVE: HFF Management Buyout Likely as Lend Lease Exits US

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