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Commercial Property News
Lend Lease hit by UK housing market and losses in commercial property values of 12%
Lend Lease, the Australian property group that is developing London's Olympic village, has announced a 12% drop in the value of its stake in Bluewater, the shopping centre in Kent, near London.
Lend Lease also blamed difficult UK housing market conditions on a A$121.5m (US$113m) writedown in the carrying value of Crosby Lend Lease, the company's UK homes business, which will see full-year after-tax profits almost halve.
The value of Lend Lease's 30% interest in Bluewater has fallen from £647.4m in June 2007 to £570.6m (US$1.1bn), although the company offered reassurance that this loss did not impact on its profit and loss account or balance sheet. The stake is held as inventory, at its original cost of £250m.
The fall in value of its stake in Bluewater, one of the largest UK shopping centres, gives a good benchmark of just how far commercial property values have dropped in the UK. But the exposure to the troubled UK housing market will be most worrying for investors.
Lend Lease is the latest property group to suffer from declining asset values in the sector after mortgage lending dried up and house prices began falling in the aftermath of the collapse in the US subprime housing market.
Greg Clarke, chief executive, said that the group was operating in a "hostile commercial environment". "There is a lack of liquidity in the UK where people just can't get mortgages to buy apartments," he said, adding that hundreds of properties needed to be discounted in order to shift excess inventory.
Lend Lease's shares dropped $1.34, or 13.4%, to $8.66 its biggest one-day slide since December 2000. The stock has halved in value this year, cutting its market value to about $A3.5 billion.When Mr Clarke took the helm in December 2002, the company's shares were trading at $9.77.
But the company said it was difficult to provide guidance with confidence given the continued volatility in global credit and property markets.
''Our priority is to run the business through the downturn not to preserve earnings stability,'' Mr Clarke said.
Mr Clarke said Lend Lease was well positioned to exploit current conditions in the property market.
He said there were now many opportunities to buy property assets at a greatly reduced price, and Lend Lease had the money to do it.
Lend Lease also blamed difficult UK housing market conditions on a A$121.5m (US$113m) writedown in the carrying value of Crosby Lend Lease, the company's UK homes business, which will see full-year after-tax profits almost halve.
The value of Lend Lease's 30% interest in Bluewater has fallen from £647.4m in June 2007 to £570.6m (US$1.1bn), although the company offered reassurance that this loss did not impact on its profit and loss account or balance sheet. The stake is held as inventory, at its original cost of £250m.
The fall in value of its stake in Bluewater, one of the largest UK shopping centres, gives a good benchmark of just how far commercial property values have dropped in the UK. But the exposure to the troubled UK housing market will be most worrying for investors.
Lend Lease is the latest property group to suffer from declining asset values in the sector after mortgage lending dried up and house prices began falling in the aftermath of the collapse in the US subprime housing market.
Greg Clarke, chief executive, said that the group was operating in a "hostile commercial environment". "There is a lack of liquidity in the UK where people just can't get mortgages to buy apartments," he said, adding that hundreds of properties needed to be discounted in order to shift excess inventory.
Lend Lease's shares dropped $1.34, or 13.4%, to $8.66 its biggest one-day slide since December 2000. The stock has halved in value this year, cutting its market value to about $A3.5 billion.When Mr Clarke took the helm in December 2002, the company's shares were trading at $9.77.
But the company said it was difficult to provide guidance with confidence given the continued volatility in global credit and property markets.
''Our priority is to run the business through the downturn not to preserve earnings stability,'' Mr Clarke said.
Mr Clarke said Lend Lease was well positioned to exploit current conditions in the property market.
He said there were now many opportunities to buy property assets at a greatly reduced price, and Lend Lease had the money to do it.
Tue, 5th Aug 2008