Lend Lease Group, Australia’s biggest listed developer, said first-half profit fell amid challenging construction markets in Australia and the U.K. and after last year’s one-time boost from a Sydney redevelopment.
Net income declined 16 percent to A$251.6 million ($227 million) in the six months to Dec. 31 from A$300.9 million a year earlier, the Sydney-based company said in a statement to the Australian stock exchange.
Profit from Lend Lease’s construction division in Australia decreased and Europe recorded a loss even as the company’s Australian and U.K. residential businesses received a boost from improved housing markets. Its planned projects have an estimated end value of A$38.4 billion and include the A$6 billion Barangaroo South development in downtown Sydney and the 1.5 billion pound ($2.5 billion) Elephant and Castle regeneration in central London.
The weakness in Europe “should be temporary with the U.K. construction purchasing managers index the strongest it’s been since 2007,” Ben Rundle, an analyst at Moelis & Co. in Sydney, wrote in an e-mailed note.
The developer, which has leased 77 percent of the first two office towers at Barangaroo, is in talks with potential tenants for the rest of the space, as well as for the third building it hasn’t begun work on yet, Chief Executive Officer Steve McCann said by telephone today.
The company, which partnered with its unlisted Australian Prime Property Fund Commercial, Canada Pension Plan Investment Board and local pension fund Telstra Super to finance the construction of the two office towers, hasn’t decided how it will fund the third building, McCann said today.
Profit fell 27 percent to A$223.5 million in Lend Lease’s Australian business and slumped 86 percent to A$8.2 million in Europe. It more than doubled in Asia to A$69.1 million and increased 85 percent to A$48.1 million in the Americas.
Construction work in Australia fell 1 percent in the three months to Dec. 31 from the previous quarter, government data showed today, compared with expectations for a 0.2 percent gain.
“We’ve a pretty active development business looking at a number of relatively large-scale projects in Malaysia and Singapore,” he said. “We’re pretty confident about the outlook.”
The company is also progressing on talks on a development fund in China, primarily focused on retail projects, McCann said, declining to provide further details on plans.
“It’s not an easy place to get momentum,” McCann said. “We’ve been there as a builder for a long time but as a developer investing our own capital and our investors’ capital through the investment management business, we’re determined to make sure we only get into the right projects, and we don’t get too aggressive.”
McCann first revealed plans for the fund in 2012, saying he expected to establish a vehicle to invest in China’s biggest cities within the next three years.
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