Two years into a strategy reset designed to shrink Lendlease back to its Australian core, the big asset sales are finally landing. Yet the Balance Sheet target has slipped badly, the securities sit near four-decade lows, a new chief executive arrives in September, and the promised buyback still has not started.

On 1 June 2026, Lendlease Group (ASX: LLC) told the market it would sell its development rights to the Milano Santa Giulia project for roughly $250 million — about $90 million in cash, with the buyer assuming some $160 million of project Debt — and book an FY26 operating loss of around $175 million on the exit. The securities fell 5.5% that day to $2.57, an intraday low of $2.50, and a level not seen in about 40 years. It was a blunt illustration of the trade the group has been making since May 2024: certainty of exit, purchased at the cost of carrying value.

Why the stock is back on the radar

Lendlease is one of the ASX’s most closely watched restructuring stories, and for uncomfortable reasons. The securities were removed from the S&P/ASX 100 at the March 2026 rebalance. 1 billion against a 52-week range of $2.40 to $5.76, and at a Price-to-Book Ratio near 0.4. That discount is the whole argument. Bulls see a portfolio being sold at or near Book Value into willing institutional hands; bears see a company whose book was never worth what it said.

Fund managers are taking sides. L1 Capital lodged a substantial holder notice on 15 June 2026 disclosing 45.6 million securities, or 6.61%, accumulated on-market since March. Allan Gray trimmed from 8.3% to 7.2%, citing a less attractive risk-reward profile.

The catalyst: a July of completions, and a June of downgrades

June and July brought the two halves of the story in quick succession.

On 11 June 2026 the group named Nick O’Neil — head of Australian Real assets at AustralianSuper, previously 17 years at Macquarie — as Group CEO and Managing Director from 10 September 2026, with Tony Lombardo departing at the end of that month. Chairman John Gillam said O’Neil was “ideally positioned to lead the next phase of revitalising and strengthening Lendlease”. Alongside the appointment came a market update that reaffirmed FY26 Earnings guidance but conceded that underlying gearing at 30 June 2026 would land in the “mid-30% range” — against the 15% target management had defended only in February.

Then the deals landed. On 25 June, Lendlease agreed to sell its 25.1% co-investment in the Keyton retirement living platform to Aware Super for $525 million cash at HY26 book value, with completion targeted for 1H FY27; the securities jumped 8.9%. The Malaysian TRX divestment completed on 1 July. A day later the group closed its 50/50 joint venture with The Crown Estate covering six UK regeneration projects with £24 billion (about $46 billion) of gross development value and up to 30,000 homes — releasing roughly $115 million on commencement, on top of a $50 million deposit banked in June 2025, and halving Lendlease’s future funding obligations. Cumulative Capital Release Unit (CRU) transactions announced or completed since May 2024 reached about $3.4 billion following Keyton, against the original $4.5 billion ambition.

Where the numbers actually sit

FY25 (year to 30 June 2025) was the reset’s High-Water Mark : statutory profit of $225 million after a $1.5 billion FY24 loss, operating profit after tax of $386 million, operating earnings of 55.9 cents per security, distributions up 44% to 23.0 cents, gearing of 26.6% and net debt down $400 million to $3.4 billion. The board approved a $500 million buyback conditional on capital-recycling milestones.

1H FY26 (six months to 31 December 2025, released 23 February 2026) went the other way. The statutory result was a $318 million loss, including $118 million of non-cash Investment property revaluations; the operating loss after tax was $200 million. The continuing IDC segments — Investments, Development and Construction — produced $204 million of EBITDA, down from $341 million, or 12.6 cents per security. The CRU lost $284 million, including about $180 million of write-downs and provisions: $136 million against Communities development land following an adverse court finding at Gilead, and $44 million on international construction Tail risk . An interim distribution of 6.2 cents was declared. Reported gearing was 25.8%, but underlying gearing — which strips out roughly 7.1 percentage points of hybrid benefit — was 32.9%. Liquidity stood at $3.3 billion.

The Australian operating businesses, notably, are the bright spot. Construction Revenue rose 22%, Backlog climbed 36% to $8.0 billion, and $4.7 billion of new Australian development projects were secured in the half, including the Sydney Metro Hunter Street West over-station development. Funds under management were $48.7 billion.

The case for, and against

The bull case is arithmetic. If the CRU keeps clearing at book, the residual is a capital-light Australian platform: an investment management Business with $48.7 billion of FUM, a construction book with $8 billion of secured revenue and a development pipeline management targets at $10 billion of FY26 originations, all available today at 0.4 times book. Management has reaffirmed FY26 IDC earnings of 28 to 34 cents per security, implying a materially stronger second half, and Moody’s reaffirmed its Baa3 investment-grade rating with a stable outlook on 25 May 2026.

The bear case is timing and trust. Gearing at mid-30% is more than double the promised 15%, which pushes the $500 million buyback — explicitly conditioned on visibility to sustainable 15% underlying gearing — well into the future. The Milan exit at a $175 million operating loss raises fair questions about carrying values elsewhere. The headline Yield above 8% is not covered by earnings or free Cash Flow . And an incoming CEO with no Lendlease history may reasonably want to re-mark the portfolio and reset targets on arrival.

What to watch

The FY26 result in August is the first checkpoint: whether IDC lands inside guidance, where underlying gearing actually prints, and whether a final distribution is declared. After that, watch Keyton’s completion in 1H FY27, the APPF Retail Recapitalisation , and any strategy revision from O’Neil after 10 September.

Lendlease has done the hard, unglamorous work of selling. What it has not yet demonstrated is that the residual business earns enough to justify the capital still tied up in it. The next twelve months, under new Leadership , should settle that question.