Lendlease Annual Report 2024

52 Lendlease Annual Report 2024 Investments segment Key financial and operational metrics FY23 FY24 Management EBITDA ($m) 1 104 113 Co-investment EBITDA ($m) 2 118 124 Other EBITDA 3 110 (63) Operating EBITDA ($m) 2 332 174 Operating Profit after Tax ($m) 245 136 Invested Capital ($b) 4 4.0 3.8 Funds Under Management ($b) 5 48.3 47.3 Assets Under Management ($b) 5 32.8 33.8 Management EBITDA Margin (%) 37.8% 41.5% Investment Portfolio ($b) 6 3.9 3.6 1. Earnings primarily derived from the investment management platform. 2. Returns excluding non-cash backed property related revaluation movements of Investment Property, Other Financial Assets, and Equity Accounted Investments in the Investments segment. 3. Includes transaction gains and losses. 4. Securityholder equity plus gross debt less cash on balance sheet. 5. The Group's assessment of market value. 6. The Group’s assessment of market value of ownership interests. Performance 1 The Investments segment generated EBITDA of $174m, down 48 per cent on FY23 which benefitted from the divestment of 34 per cent of the US Military Housing Asset Management income stream. FY24 EBITDA was impacted by a final provision of $58m taken against a receivable from the FY21 disposal of the US Telecommunications business, which followed a provision of $74m in FY23. Management EBITDA, derived from funds and asset management fees was $113m, up 9 per cent on the prior year due to lower expenses that more than offset the impact of lower average FUM. Management EBITDA margin increased to 41.5 per cent, up from 37.8 per cent in the prior year. Co-investment EBITDA of $124m was up 5 per cent from $118m. Stabilised investment yield of 3.5 per cent across the portfolio, increased from 3.1 per cent. Improved yields were seen across workplace, Retirement Living and retail assets. The Group’s total Investments segment capital of $3.8b decreased by 5 per cent and primarily relates to co-investments in funds managed by the Group. The co-investment portfolio at FY24 was $3.6b, down from $3.9b, following revaluation and foreign exchange impacts of $0.4b, asset divestments of $0.1b, including the sale of Darling Square retail in Sydney, and a further $0.2b of capital invested, mostly into APPF Retail. The co-investment portfolio is well diversified, with primary exposures across workplace, retail and residential as well as investments in retirement and industrial. Other EBITDA recorded a loss of $63m, including a final $58m provision against the receivable from the disposal of the US Telecommunications business and the divestment of retail assets in FY24 at modest discounts to book value. Other EBITDA in FY23 benefitted primarily from US Military Housing transaction profits. Operations Investments earnings are comprised of funds and assets under management contributions, co-investment portfolio yield and performance and transactions fees. Funds under management reduced by 2 per cent from $48.3b to $47.3b. Negative revaluations of $3.5b and largely retail divestments of $0.7b, were mostly offset by FUM additions of $3.4b from the completion of several projects. These included The Exchange TRX in Kuala Lumpur, The Reed in Chicago and a data centre in Tokyo, as well as capital invested across APPF Commercial and several US assets. In addition to current FUM, international development projects with capital partners are expected to add more than $6b in FUM over coming years, with $0.8b contributed in FY24 and a further $1.0b expected in FY25, including workplace developments the Forum, Boston; the Turing Building, London; and Paya Lebar Green, Singapore. Assets under management increased 3 per cent from $32.8b to $33.8b underpinned by the $1.5b completion of The Exchange TRX retail asset which opened during the year and is now more than 98 per cent leased. This was partially offset by a number of retail divestments in the year. The Group’s co-investment portfolio of $3.6b is well diversified with $1.0b in workplace, $1.0b in retail assets and $0.6b in residential, $0.5b in retirement and $0.5b across other asset classes, including industrial. The Group intends to continue to grow its investment portfolio while targeting an average co-investment of 5-10 per cent of capital deployed, providing alignment with partners and continued exposure to operating leverage as the platform achieves greater scale. 1. Comparative period the year ended 30 June 2023.