Lendlease Group (LLC) Earnings Call Transcript

Good morning, everyone, and a warm welcome to the Lendlease 2020 Annual General Meeting. My name is Michael Ullmer, and I am the Chairman of the Lendlease Group. Due to the ongoing risk of COVID-19 pandemic, this meeting is being held online. For some securityholders, I expect this will be a somewhat familiar experience. For others, it may be less so. It's unfortunate we can't be together in person, but I'm pleased that so many people could join us today in this virtual format. I would like to assure all securityholders that you will have the same opportunity to participate today as would be the case at an in-person meeting. I'm participating in this meeting from Lendlease's Melbourne Quarter office, which is located on the land of the Woiwurrung People and the Boon Wurrung people of the Kulin Nation. The Woiwurrung People and the Boon Wurrung are the traditional custodians of this land, and I extend my respects to their elders, past, present and emerging. I also acknowledge and pay my respects to any other First Nations peoples who are participating in this meeting. It now gives me pleasure to introduce your Board of Directors. Joining me in Melbourne today is nonexecutive Director Colin Carter. Colin will be retiring from the Board after more than 8 years of service, and I'm pleased that he is able to join me in person for his last AGM. Nonexecutive Director, Jane Hemstritch, is also in the room and is standing for reelection today. If reelected, Jane will take over from Colin as the Chair of the Nominations Committee. I will now introduce members of your Board who are joining from our Sydney office at Barangaroo. Nonexecutive Director, Elizabeth Proust. Elizabeth is Chair of the People and Culture Committee. We also have Phil Coffey, Chair of our Risk Committee and standing for reelection today. Nicola Wakefield Evans, Chair of our Sustainability Committee; and David Craig, Chair of our Audit Committee, are also attending from our Barangaroo office. Now due to travel restrictions, Bob Welanetz is joining from his home in Atlanta in the United States. This is Bob's first AGM with Lendlease, and he is standing for election today. We also have our group CEO and Managing Director, Steve McCann, in our Barangaroo office; and our company Secretary, Wendy Lee. Various members of Lendlease's global leadership team are joining the meeting virtually. Duncan McLennan from KPMG, the group auditor, is also with the team in Barangaroo and is available to answer any questions relating to the audit of the group's financial statements. Justin Robinson from our share registry, Computershare, has joined the meeting virtually and will act as Returning Officer. I now confirm that a quorum is present and formally declare the meeting open. Before I begin my address, I will hand over to our company Secretary, Wendy Lee, who will outline the procedure for asking questions and voting. Over to you, Wendy.

Thank you, Chairman, and good morning, everyone. I welcome you all to Lendlease's first virtual AGM. Today's meeting is being held online via the Lumi platform. All attendees can watch the live webcast and securityholders and proxyholders have the ability to ask questions and submit votes. Eligible securityholders will have access to a message icon and a polling icon, and will be able to ask questions and vote using these icons. Guests who are not securityholders will not have access to these icons and will not be able to ask questions or vote. Securityholders can ask questions via the Lumi app and via telephone. [Operator Instructions] Please note, your questions may be moderated or amalgamated if more than one question is received on the same topic. Also, while you may submit questions via the Lumi app from this point on, your question won't be addressed until the appropriate time in the meeting. Whilst we will ensure there is a reasonable opportunity to ask questions or make comments, your questions or comments may be limited, so that we have an opportunity to take questions from as many securityholders as we can. [Operator Instructions] Voting today will be conducted by way of a poll. The Chairman will shortly open voting for all resolutions. If you are eligible to vote at this meeting, a polling icon will appear on your screen. Selecting this icon will bring up a list of the resolutions and present you with voting options. To cast your vote, select one of the options. There is no need to hit submit or the enter button, as the vote is automatically recorded. However, you do have the ability to change your vote up until the time the poll is closed at the conclusion of the last item. If you have difficulty with the Lumi platform, please refer to the help guide on our website or call Computershare on international code +61-3-9415-4024. In the unlikely event that we do experience any major technical difficulties, the following will happen. If we lose connectivity with Sydney, the Chairman will continue the meeting from Melbourne. If we lose connectivity with Melbourne where the Chairman is located, Elizabeth Proust will chair the meeting from Sydney. If we lose connectivity with both Melbourne and Sydney, we will adjourn the meeting for an hour or so and then return to the meeting. We will provide you with updates through our website and the ASX. Finally, we remind securityholders and guests that a recording of the meeting will be available on the Lendlease website following the meeting. I will now hand back to the Chairman.

Thank you, Wendy. I now declare voting open on all items of business. The polling icon will soon appear, so please submit your votes at any time. As Wendy said, we will close the poll after Item 4, and I will give you warning before I do so. [Voting]

I now move to my address, which will include our year end review. As always, I will start with health and safety. Health and safety remains our #1 priority. Keeping people safe takes precedence over everything else. The group's global minimum requirements were introduced in 2008 and provide the framework and standards that guide decisions for managing health and safety. The application of these standards, combined with our broader culture of care, has led to a consistent improvement in safety performance. In financial year '20, the critical incident and lost time injury frequency rates were at their lowest levels since we began reporting on these metrics. Notwithstanding this strong performance, in September 2019, Mohammed Nurul Amin passed away in hospital from an infection contracted following surgery after a critical incident on one of our sites in Kuala Lumpur. And tragically, last month, a roof collapse at Curtin University in Perth, Western Australia, resulted in the death of Jonnie Hartshorn and the serious injury of 2 co-workers. Our condolences and thoughts are with the men's families, colleagues and friends. These tragic incidents provide a powerful reminder of why such an unrelenting focus on health and safety is so important. The Board and management will continue to maintain a relentless focus on safety leadership throughout the organization. Executives throughout the group have clear safety KPIs, which form part of the Board remuneration decisions for senior executives. We also reward our employees for outstanding safety performance, leadership and innovation. Turning to COVID-19. It is impossible to present our year-end review without acknowledging COVID-19 and its impacts on the regions in which we operate, and our stakeholders including our people, security holders and customers. The pandemic has impacted most aspects of society. Governments around the world quickly responded to help shield their citizens and economies from the worst of the virus's effects. This was and continues to be an entirely appropriate course of action. In a similar vein, the Board moved decisively to address COVID-19-related risks. A Board subcommittee, which had primary oversight of the group's response to COVID-19, was formed in March 2020 and met weekly for the following 2 months when the uncertainties of the pandemic impact were at their peak. The health and safety of our people, our customers, and the communities in which we operate was paramount, as was the strength of our balance sheet. The $1.2 billion equity raising and the securing of additional debt facilities strengthened the balance sheet and liquidity position of the group and put us in a position to take advantage of opportunities as markets stabilize and deliver the more than $100 billion of our development pipeline. Moving to the financial performance. The group reported a statutory loss after tax of $310 million, including $368 million of after-tax costs relating to the exit of our Engineering business. These exit costs were in line with the previous flagged estimate announced in February 2019. While disappointing, the Board remain confident that exiting the Engineering and focusing on our core businesses is in the best interest of securityholders in the longer term. In terms of that core business, a solid first half profit of $300 million after tax was followed by a $212 million loss after tax in the second half. This was due to COVID-19. Each of our 3 operating segments were impacted. The Development segment through delays in conversion of opportunities across urbanization projects, Construction, via mandatory site shutdowns and lower productivity due to adherence to physical distancing protocols, and the Investment segment through valuation declines across the group's investment portfolio. Distributions to securityholders reflect $0.30 per security in the first half and the distribution of trust earnings in the second half of $0.033 per security. The group entered financial year '21 in a strong financial position, with total liquidity of $5.8 billion, representing cash and undrawn debt. And this gives a gearing of 5.7%. Now turning to our purpose and strategy refresh. Throughout financial year '20, the group undertook extensive consultation with our employees, customers and the leadership team to refresh the company's purpose statement. From its inception, Lendlease has been purpose-led with Founder Dick Dusseldorp articulating the broader social and environmental outcomes that have guided the company. Stakeholders, including governments, investors, customers and the communities within which we operate are increasingly looking for organizations to demonstrate their contribution to society beyond a pure profit motive. In late August, we released our new purpose statement. Together, we create value through places where communities thrive. This acknowledges our rich history and leadership in place making, but also more broadly encompasses the value we create in partnership with others. The refreshed purpose statement anchored the group's revised strategy, which was also released in August. The strategy aims to bring our purpose to life by employing our place-making expertise and integrated business model in global gateway cities to deliver urbanization projects and investments that generate social, environmental and economic value. It expands and upweights those parts of the business that have the greatest potential to drive securityholder value, and it leverages the group's competitive advantage. Now there are many companies that operate in the development, construction or investment segments of the real estate industry, but only a handful can integrate all elements in the value chain, from concept planning to design and delivery through to funding and investment management, and in a manner that crystallizes that end-to-end capability. Creating places is in Lendlease's DNA. Place creation requires a combination of global competence with authentic local engagement. It means having the skill to not only define the best of all possibilities for a site, but the discipline to deliver that vision sustainably and in partnership with the community. In keeping with the times we are in, the strategy was stress tested against a range of possible future scenarios in the wake of COVID-19. This work confirmed our view of the resilience of our business model to an evolving market environment. I am pleased to report the strategy has received strong support from our major security holders. It has also been endorsed by the credit rating agencies. Notably, Moody's have returned their outlook for us to Stable and have adjusted their rating methodology, including higher tolerance levels to reflect the group's improved business risk profile. This brings me to the executive reward strategy, or ERS. We outlined the changes to our ERS in the Financial Year '18 Remuneration Report some 2 years ago and received securityholder approval of over 90%. Our approach to remuneration recognizes the need to balance rewards for performance to highly capable executives with returns to securityholders. The ERS has been calibrated to reflect the long-dated nature of our business, recognizing that the investment decisions we make today have an impact on earnings many years into the future. Our fixed remuneration is set with reference to roles in other organizations of a similar size and complexity, as well as to industry peers, and recognizes the high caliber of our people. This is supplemented by the restricted securities award, a long-term deferred equity award that vests over a [Audio Gap] The restricted securities award is intended to provide the retention of executives and help them build their security holding in the group, further aligning executive decision-making with long-term security holder interest. The short-term award, incentivizing current year performance, represents a relatively small proportion of total remuneration. Half of this short-term award is assessed against financial metrics and half against nonfinancial metrics that support long-term value creation. A key design feature of the ERS is to align remuneration outcomes to our business model, where profits emerge over an extended period. Remuneration for senior executives is heavily skewed to long-term awards, and the long-term award is subject to challenging performance hurdles and represents approximately 50% of the maximum remuneration opportunity for the CEO and senior executives. Now financial year '20 was a difficult year. And in recognition of this, the global leadership team proposed a 20% reduction in their fixed remuneration for a period of 4 months, which a wide range of employees, including almost all executives and nonexecutive directors, agree to take on a voluntary basis. A portion of these savings were used to seed a hardship and well-being fund, which provided grants to support our people who needed short-term help to cover essential expenses of everyday life. Now half of our short-term award opportunity available to reward employees was forfeited, as the group failed to meet established financial performance thresholds. However, awards in relation to nonfinancial metrics were made, reflecting the substantial growth in the development pipeline during the year, and significant progress on a range of strategic initiatives. Total awards of $1.6 million, representing no more than 20% of the maximum opportunity, were granted to key management personnel in the form of restricted securities with a vesting period of up to 2 years. No cash bonuses were paid to senior executives. Executives received nothing for the long-term incentives where performance was tested following the end of financial year '20. And consistent with our reporting approach from prior years, the results of that testing of those long-term awards will be detailed in the financial year '21 remuneration report. Now let me turn to sustainability. At Lendlease, we have a long history of achieving sustainability firsts. This continues to be the case. In 2018, Lendlease committed to incorporating the Task Force on Climate-related Financial Disclosure, or TCFD, framework into our disclosure regime. As a result, we are now much better equipped to provide our investors and stakeholders insights on how we are building resilience to climate-related risks and opportunities in our business. Consideration of climate-related risk is now an integral part of every investment decision. During the year, we tested the resilience of our business against 3 future climate scenarios where the world could be warmed by up to 4 degrees. The outcomes from these scenarios were synthesized into 10 climate-related impacts for each scenario. The outputs [Audio Gap] to the TCFD recommendations, including our qualitative analysis and financial disclosure in financial year '21. Importantly, they were used to inform our new sustainability targets. First, market-leading carbon targets to support our vision to live in a world warmed by no more than 1.5 degrees Celsius, with our first milestone to be net 0 carbon on Scope 1 and 2 emissions by 2025. And following this, absolute 0 carbon across all our operations by 2040. Second, we are aiming to create $250 million of social value by 2025. While recognizing these new targets will be difficult to achieve, we believe they are worthwhile for striving for as our leadership position on sustainability continues to be a key competitive advantage that drives securityholder value. The Board is also proud of our third reconciliation action plan or RAP, which operates a reconciliation of Australia's highest level Elevate. This level recognizes companies with a proven track record where the actions are embedded in the business and not an add-on. The vision for our RAP is one that encourages all employees to acknowledge and celebrate the proud heritage of Australia's first peoples. It also promotes opportunities for career development, sustainable business growth and economic participation of aboriginal and Torres Strait Islander Australians. Before I conclude my address, I would like to provide an update on board renewal. After more than 8 years of service, Colin Carter will retire at the conclusion of the 2020 Annual General Meeting. During his tenure, Colin made an outstanding contribution, including oversight of the Board's long-term renewal and succession strategy and board performance assessment. His depth of experience in strategy, sustainability and governance has helped shape Lendlease's position on these critical issues. On behalf of all the Board, I thank Colin for his unwavering support. During the year, we continue to focus on our ongoing program of Board renewal and appointed 2 new nonexecutive directors. Margaret Ford, OBE in the U.K. and Bob Welanetz in the U.S. However, given the disruption caused by COVID-19, including continuing global travel bans and time zone challenges, Margaret has elected to step down from the Board. Margaret continues to assist the Lendlease board in respect to the group's European operations in an advisory capacity, and she has expressed a willingness to rejoin the Board once the COVID-19 restrictions on travel have subsided. Bob, who brings significant international experience in our core sectors of development and investments, will be standing for election today. Nonexecutive directors Jane Hemstritch and Phil Coffey are standing for reelection, and the Board unanimously supports their reelection. All directors who are seeking election or reelection are outstanding and bring a range of diverse experiences which have been of enormous benefit to securityholders during the board's deliberations. More broadly, I am confident the Board has the right mix of skills, experience and diversity to govern Lendlease in the best interests of all our stakeholders. Thank you. I will now hand over to Steve in Sydney.

Thank you, Michael, and good morning, everyone. Standing here at Barangaroo in Sydney, I acknowledge the Gadigal people of the Eora Nation and pay my respects to their elders past, present and emerging. The financial year just gone will be a watershed year in history, with the impacts of COVID-19 likely to reshape society for years to come. I start this address by recognizing the unwavering support and commitment of the people of Lendlease to each other, to our customers and to the strength of the organization. Our people have drawn on the resilience, adaptability, focus and care that have long been hallmarks of our business to steer us through an unprecedented operating environment. As COVID-19 set in, an extraordinary effort was made by our teams to keep our people and those who interact with us safe, while at the same time supporting the continuance of operations. This level of focus was applied across all businesses and locations through adjusting office and site-based working arrangements and quickly introducing new policies, education and support for employees and customers as restrictions on social [Audio Gap] and social distancing protocols became first lines of defense. Wherever we operate, Lendlease has continued its partnership approach with governments, by responding to the public health and economic crisis presented by COVID-19. We have provided practical support, including accommodation to frontline workers, and food and other supplies to the most vulnerable members of our community. We also shared our safety standards to make construction sites globally COVID-safe. We acknowledge that our government partners have adopted the same approach and recognize the crucial role of the property and infrastructure sectors in the economy. At Lendlease, our highest priority is that our employees, subcontractors and people who interact with our places, get to go home safely every day. Improving our performance and eliminating incident and injury has been at the forefront of our strategy and operating philosophy. A strong safety culture has always been embedded within the organization. Our global minimum requirements, or GMRs, provide a consistent standard and operating discipline that define the Lendlease way for managing health and safety. The GMRs require health and safety be considered from the moment we commence interest in any new work or investment opportunity. We believe we can make an impact at every stage of the property and construction life cycle, understanding that the greatest opportunities come in eliminating incident risks in design and planning. Our safety culture has transitioned to a holistic culture of care. This encompasses the way we engage with the workforce, the facilities we provide and the planning we put in place to eliminate risks from the workforce. These are the hallmarks of the things we do. Our view is that a place that cares is a safe place to work. We believe this culture of Care has contributed to an improved safety performance in recent years. The improvements we have made in our safety performance provide no comfort when a human life is lost or is impacted by serious injury. Injuries and fatalities suffered on our projects have devastating impacts on the families affected. I add my sincere condolences to the family and friends of Mohammed Nurul Amin who lost his life several weeks after sustaining an injury while working on our Affin Bank Berhad project in Kuala Lumpur in September 2019. As Michael noted, last month a roof collapse at Curtin University in Perth, Western Australia, resulted in one fatality and the serious injury of 2 coworkers. Our thoughts are with everyone impacted by this tragic event, particularly Jonnie's family, friends and colleagues. For our building business who have operated without a fatality for more than a decade. It's been a huge blow, as they are widely recognized throughout Australia for their safety standards and performance. The precise circumstances surrounding the incident are still being determined. We are determined to fully understand the event and the learnings for ourselves and the wider industry, to prevent this type of tragic incident from occurring again. The Chairman has already discussed the statutory loss after tax of $310 million for the year ended June 30, 2020. In terms of the core business, COVID-19 had a significantly adverse impact on profitability. After delivering a solid profit after tax of $308 million in the first half, a significant deterioration in operating conditions occurred following the onset of the pandemic, resulting in a $212 million after-tax loss in the second half. This resulted in a $96 million profit after tax for the full year. We experienced delays in the conversion of opportunities across our urbanization pipeline. The impact across our construction projects was greater in our international regions, particularly in cities where mandated shutdowns were implemented. And the group's investments portfolio was impacted by declining real estate values. In response, we implemented a range of measures to strengthen the financial position of the group. Costs were reduced along with the reassessment of capital and project expenditure. The issuance of new equity and the arranging of additional debt was aimed at providing the group with the capacity to manage through a potential sustained downturn and position the group for a market recovery. While we delivered a disappointing financial result, we made substantial progress on our strategic agenda, including growing and converting the development pipeline, achieving important planning milestones and creating new investment partnerships. We made significant inroads into positioning the organization at the forefront of sustainable development. This included investment in people, process and technology, which has laid the foundation to better enable and fast track the delivery of our pipeline to meet the needs of changing urban landscapes. Some of our achievements in FY '20 are worth highlighting. In Milan, a new partnership was formed with PSP Investments, one of Canada's largest pension funds, to develop the $4 billion Milano Santa Giulia project. The urban regeneration project is expected to deliver more than 2,500 residential units and approximately 230,000 square meters of commercial, leisure and entertainment areas. In Sydney, the 58,000 square meter Victoria Cross Over Station Development will be delivered in partnership with the Australian Prime Property Fund Commercial. 2 residential for rent buildings at London's Elephant Park were put into delivery through our existing partnership with CPP Investments. In Chicago, 3 buildings at Lakeshore East and South Bank comprising both apartments for sale and rent, commenced delivery. The retail and residential components of Paya Lebar Quarter Singapore were completed, marking the culmination of the 4-year development, with the Precinct now contributing $3.3 billion in funds and assets under management. The listing of the Lendlease Global Commercial REIT in Singapore demonstrates the support for the group's global fund and asset management expertise. The group added 2 new major residential-led urbanization projects to its portfolio. Thamesmead Waterfront in London, and a partnership with Google in the San Francisco Bay Area. These residential-led projects have a combined estimated end development value of $37 billion. This continued origination success during the year has resulted in the development pipeline more than doubling over the last 5 years to $113 billion. Despite our short-term challenges, through these wins, we continue to strengthen our longer-term outlook. And early in the current financial year, we established an investment partnership with Mitsubishi Estate to deliver the first residential tower at One Sydney Harbour, Barangaroo South. I'm pleased to report that we've made significant progress on the exit of the noncore segment since the start of a new financial year. The sale of the Engineering business to Acciona completed on 9 September. The transition to the new owners has been smooth, with the business now transferred along with more than 1,900 permanent employees for whom we wish great success. At the time of the sale, 3 Engineering projects were retained by the group. 2 of those projects, NorthConnex and Kingsford Smith Drive are now complete. The Melbourne Metro Tunnel project is the final remaining project. The Cross Yarra Partnership Consortium, of which we are a joint venture partner, signed a nonbinding commercial principles deed with the Victorian government on June 30, 2020, to resolve issues in relation to the scope and costs of the project. Confidential negotiations between the parties to reach a binding agreement are expected to be finalized in coming weeks. The terms are expected to be consistent with the commercial principles deed. We will look to reengage with potential acquirers of the services business in the New Year, after the sales process was paused in the wake of COVID-19. While the underlying business has been performing well, it's not core to our urbanization strategy, and hence, we are seeking a divestment. We disclosed a restructuring cost estimate to exit the engineering and services businesses of approximately $550 million pretax at the FY '20 results, $525 million of which was expensed in FY '20. This includes the completion of the sale of the engineering business to Acciona, the completion of 2 retained projects and is based on CYP reaching a binding agreement with the Victorian government on terms consistent with the commercial principles deed. And that brings me to a broader discussion on strategy. In late August, we briefed the investment community on our revised strategy. As Michael noted, our strategy for the next decade aims to bring our purpose to life by employing our placemaking expertise and integrated business model in global gateway cities, to deliver urbanization projects and investments that generate social, environmental and economic value. The management team is optimistic and excited regarding the prospects for the group. We are focusing on 5 strategic priorities: Leveraging our competitive edge, accelerating delivery of our development pipeline, scaling up our investments platform, world's best practice delivery, and continuing leadership in sustainability. These are where our competitive edge lies and where we see the greatest opportunity and returns in the future. We are committed to better leveraging this competitive edge and are well positioned to generate significant growth from our strategic focus areas of large-scale, mixed-use urbanization projects and the investments platform. Both will receive a larger share of the group's organizational resources and capital over coming years. We will also redirect resources away from areas where our competitive edge isn't as strong or where the industry structure has either deteriorated or changed. I've already outlined the progress we have made on the exit of the noncore segment, and we recently divested our U.S. telecommunications and energy businesses in separate transactions. We will also pursue other capital recycling opportunities. We expect to create more than $50 billion of investment-grade product from the urbanization projects we have already secured. This provides a significant opportunity to materially boost our investments platform. This should provide a strong base for future annuity earnings. In addition, we also have the appetite and global capacity to pursue the launch of new products and market growth opportunities alongside our investment partners and are already engaged in these discussions. At our recent strategy update, we outlined our intent to create a scale global investments platform and noted that external market opportunities would arise. Several opportunities have emerged, largely in the development space, that will produce profit and investment-grade product beyond FY '21. The most notable of these was the securing of another major urbanization project, Java Street, New York, alongside our partner, Aware Super. The project, with an estimated end value of $1 billion, will transform a full city block into more than 800 residential for rent apartments. We're also making good progress in securing additional projects in Los Angeles and Singapore. These initiatives will contribute to improved quality of earnings. Our pipeline and the strength of our platform means we're in a strong position to drive long-term sustainable securityholder returns through a very focused strategy. It would be remiss not to address the cyclical and potential structural implications of COVID-19. Given its pervasive effect, we put the strategy through a rigorous stress test. We assessed the resilience of our strategy under multiple COVID-19 scenarios, specifically testing the fundamental assumptions and proposed strategic shifts that formed our strategy. The scenarios we considered incorporated assessments of the likely extent of change in customer behavior, and the depth and length of economic disruption. The analysis reconfirmed our view that the business model is resilient. We believe the business model is agile and designed to ride out market cycles. Our Gateway City strategy will prove to be robust. History suggests gateway cities absorb shocks more readily and recover more quickly. Placemaking skills provide flexibility and adaptability to respond to changes in consumer and corporate behavior. Our pipeline is strongly weighted to residential, with a significant proportion of build-to-rent product in commercial office, with very limited exposure to retail. We have depth of talent in our key focus areas of urbanization and investment management, and devote significant resources into the training and development of our people. Our high-quality relationships have also proven resilient, with the launch of both new products under existing partnerships and the creation of new partnerships since the onset of COVID-19. What will be increasingly important in our view is that cities will need to become more affordable, inclusive, sustainable and have a greater focus on intuitive and reliable transport links, security and workplace flexibility. Our business is uniquely placed to benefit from these needs. That brings me to the nearer-term outlook. We expect COVID-19 to impact our financial performance in FY '21. Despite these impacts, we remain confident that the significant growth in the secured pipeline, the achievement of planning milestones and expected investment partner appetite, provides the foundation for accelerating development activity to our target of more than $8 billion of completions per annum. That is an increase of more than 80% on our historical completion rate of $4.3 billion per annum over the last 5 years. Although we are dealing with an uncertain COVID environment, we already have work in progress with an end value of approximately $8.5 billion as at 30 June, and are looking to put more than $10 billion into delivery over the coming 18 months. The investment partnership to deliver the first residential tower at One Sydney Harbour, Barangaroo South, will contribute approximately $140 million to EBITDA in FY '21. We continue to receive strong demand for our luxury apartments at One Sydney Harbour, and are taking expressions of interest for apartments for the second tower ahead of an expected launch this financial year. At our TRX project in Kuala Lumpur, all available apartments for sale in Tower A have been sold. The digital launch of Tower B has generated strong early interest and the building will be put into delivery once the presales threshold is satisfied. We remain on track to launch sales at Ardor Gardens, our retirement living project in Shanghai, before the end of the calendar year. Our teams continue to work on a range of commercial conversion opportunities. The most promising is currently at our Milan Innovation District project, where both tenant and capital partner interest is strong. We also have strong capital partner interest in other projects, including Melbourne Quarter and International Quarter London. However, tenant inquiry is currently more subdued on these projects. We're aiming to convert these opportunities towards the back end of this financial year. At our San Francisco Bay Area project with Google, plans have recently been lodged for 2 precincts, East Whisman and San Jose. Approximately 70% of the 17,000 homes across the project will be residential for rent. This provides a strong pipeline of product for our investments platform. We hope to commence delivery in FY '22. The Australian master planned communities portfolio has experienced a recovery in inquiry levels, although not to the same extent as some of our peers have been reporting. We're looking to launch some additional projects this financial year to increase the availability of salable stock. In the Construction segment, activity has recovered from the COVID-19-related impacts that led to losses in the second half of FY '20 for the Americas, Europe and Asia. In the absence of further COVID-19-induced shutdowns, we expect construction margins to recover in FY '21. However, subdued new work secured is expected to provide a challenging revenue environment. The investment segment is expected to provide a solid base of recurring earnings. The underlying income and asset management fees across the investments portfolio is expected to recover in line with the trading performance of the assets, and the funds management business has been steady. We continue to progress a further sell-down of our retirement living investment, and capital partner discussions are in progress. While we are making good progress in our strategy, earnings in the first half of FY '21 are expected to be subdued. We are focused on converting a number of investment partnerships in the second half, which are expected to contribute to earnings. The result for FY '21 overall will remain influenced by the impact of COVID-19 and the associated government responses across our gateway cities. I would like to end by thanking you, our security holders, for your support, and my team for their dedication. We will continue to work hard to deliver positive outcomes for all of our stakeholders. With that, I'll hand back to the Chairman.

Thank you, Steve. I will now turn to the formal business of the meeting. Each resolution and supporting information is outlined in the notice of meeting. As well as consideration of financial statements, the business before us today includes 5 ordinary resolutions. The Board recommends that securityholders vote in favor of all resolutions and I intend to vote all undirected proxies that I hold as Chairman, in favor of each resolution. As stated in the notice of meeting, I am calling a poll on all resolutions. And as mentioned earlier, Justin Robinson of Computershare will act as Returning Officer on the voting. We work through each resolution in order and I will provide you with a summary of proxies received for each resolution as we progress. I'll also invite questions on each item, first through the Lumi app online, and then from the telephone, before moving to the next item. General questions relating to the management of the company may be asked during the first item, which is the consideration of the financial statements. So turning to that first item of business, which is to receive the financial statements and the directors' and auditors' reports for the financial year 2020, I've noted that Duncan McLennan of KPMG conducted the audit for the year ended June 30, 2020, and he is in attendance at this meeting to answer questions relating to the audit. If you have questions about the reports, or on the management of Lendlease, please submit your questions now. As stated earlier in the meeting, we will deal with questions via the Lumi app first before moving to questions on the telephone. So let me go to the first resolution. Moderator, are there any questions online?

Chairman, the following question is from the ASA. There has been recent media raising concerning issues in relation to Jordan Springs East and the military housing business in the U.S. Is it time for Lendlease just to build big town developments, put them in your investment business and hire good quality external people to manage them? If the answer is no, how long until Communities ends up as Lendlease's Engineering division, selling it after the damage has been done?

Thank you for that question from the Australian Shareholders' Association. There seem to be 3 parts to that question. And I should say upfront that claims made in those articles are somewhat sensational. So I think it's important for me to give you the facts. So what I'll do is I'll talk first to the comment around Jordan Springs. Secondly, the comment around military housing in the United States. And then come back and thirdly, talk about our communities business generally. With respect to Jordan Springs East, we have been working for the last 2 years now with residents who have been impacted by some ground settlement which has caused unacceptable cracking in about 90 homes. And we are very confident that the extent of that settlement is limited to the area of those 90 homes. We are really sorry for the stress and anxiety this issue is causing. Our compensation scheme has been established with the New South Wales Commissioner of Fair Trading, and many customers are accessing that scheme within that group of 90 who have been impacted. I'd have to say that we're disappointed that the local council has issued notations on properties that are not impacted by the ground settlement. And indeed, they've extended that issue to the entire precinct, which in our view is completely unnecessary. And we've been urging counsel to update customers and remove that notation on the planning documents. Secondly, if I then turn to military housing. We have been proud to partner with the U.S. Department of Defense for more than 15 years in the provision of military housing through a joint venture. And that joint venture is between us as Lendlease and the U.S. military. And through that joint venture, we support more than 125,000 residents across our network of 40,000 homes on military bases throughout the United States. Now on one of those bases, there have been 3 families who have filed claims against the joint venture. And we categorically reject the allegations and they will be vigorously defended. And just to give some context, at that particular military camp, we serve 3,500 on-base residents. We typically respond to around 40,000 change requests in any 1 year, and we manage about 40,000 changes of occupancy of military personnel coming to the base and moving from the base to go elsewhere. So as I note, the article was referring to claims filed by 3 of those families out of 3,500 on base. And we take very seriously any claim. We're working hard to resolve the issues that these 3 families have raised. And we work very hard to maintain a very high standard of service level across all of our bases. We have regular surveys that we undertake that show upwards of 90% satisfaction. And we also form consultative committees on base between the residents and ourselves to make sure that we're delivering communities that are really attractive for people to live in. So we're very sorry that there are some families that are disappointed. But as I say, I think there was a degree of sensationalism in the claims, and we're certainly working very hard to resolve them. So coming then to the broader question of where Australian Communities fits within our portfolio. It's interesting to reflect on history. And indeed, our community business dates back to 1958 when Dick Dusseldorp first came to Australia to lead and project manage the building of the community housing for the workers on the Snowy River project. And that indeed was the foundation of Lendlease, because Dick saw a great opportunity in this fantastic country and set about building the company that is now Lendlease. So our community business goes back for the entire history of this company. It has delivered strong returns over a long period and enjoys a strong market position. Its risk profile is not comparable to that of the Engineering business. And indeed, that is why we have sold the Engineering business. We would acknowledge that the Communities business has gone through a challenging couple of years here in Australia. But it's very much been a fundamental part of the Lendlease DNA for many years. As with all of our businesses within our portfolio, we continually evaluate them to make sure they fit within our strategic intent. And we will continue to do that going forward with respect to all of our businesses. But I strongly suggest that it's a very long bow to draw a parallel between our Communities business and Engineering. Thank you. Are there any more questions online?

Chairman, the following question is from the Australian Shareholders' Association. Wonderful to see a new director with actual experience in developments. Can we be assured that no more bankers will be added to Lendlease's collection for the next 5 years as they concentrate on recruiting more people who understand the risks as well as the rewards of construction and development.

So again, Australian Shareholders' Association, thank you for that question. And just to correct a point there, in the current year, as I mentioned in my opening address, we did appoint 2 new directors, Bob Welanetz, who will be covering shortly to talk to his election -- formal election at this AGM and Margaret Ford in the U.K. So we are very mindful of the need to have a broad range of skills around the Board table. I would take a point of difference with you around people understanding risk because we have very deep experience around our Board table, particularly those with financial services expertise who have spent careers evaluating the very risk that you talk about in development and real estate investment. And it's important to have a mix of skills sitting around our table. And I would observe in recent times with the onset of the COVID-19 pandemic, having that depth of risk management skills around the Board table has been instrumental in how positively and strongly Lendlease has been able to respond to that challenge. Going forward, we will continue our program of Board renewal. I would note that over the last 6 years, we have brought on to the Board at least 1 and sometimes 2 directors a year, each of those 6 years. So when you look at the tenure of our Board, we have a very spread tenure with a number of directors who have been experienced on the Board for 7, 8 or 9 years. A number of directors in the middle of their terms with the company and some -- another group of directors who have only recently joined in the last 1 or 2 years. So we have a very good spread. But going forward, we will continue to endeavor to bring 1 or 2 directors onto the Board, and we will very much take notice of your -- the advice that you've given us. Are there any more questions online, please?

Chairman, the following question is from the Australian Shareholders' Association. For 2020 and 2021, can you tell us which elements of which development project, it is forecast, will deliver the $8 billion per annum to book?

Yes. So thank you for that question from the Australian Shareholders' Association. At the strategy update, the management team -- back in August of this year, the management team provided significant detail on that new target of $8 billion per annum in development completions. And the Board approves the targets and has confidence that given the size of the pipeline, as Steve mentioned, now in excess of $100 billion, a large portion of that pipeline having planning certainty. And some of the recently secured projects and our global capability to execute following the investment we've made in recent years, we are confident that target is achievable. Steve talked to a number of the projects that are coming down the pipeline in his address. But Steve, I'll throw it to you just to give some more elaboration to that question from the Australian Shareholders' Association.

Thanks, Michael. And as you pointed out, we're building to that $8 billion per annum production target. And the good news is we currently already have about $8.5 billion in production. There's about another $10 billion of projects that we're looking to put into production over the next 18 months. So to get to a level of repeatable completions of $8 billion per annum, you need to have up to about double that in work in production at any given point in time. So that's what we're building to over the next couple of years. There's a range of different projects. I have mentioned some, the most advanced probably being Milan Innovation District where we're in significant discussions with potential tenants and also capital investors. There's also the project in the U.S., in -- on the West Coast that we've mentioned before with Google. That project overall is about 17,000 homes in total. It's a long duration project. It's in 4 different precincts, but 2 of those precincts have already been lodged for planning approval. That generally takes about 12 months or so. So our hope is that we can put them into production during FY '22. So they're the sorts of projects that then become the projects that feed that work in progress and ultimately the completion at $8 billion per annum that we're aiming for.

Thank you, Steve. And I should note that governments around the world are very keen to facilitate bringing to fruition construction projects for the way they stimulate the economy. So that is very encouraging as well. Are there any more questions online, please?

A security holder has asked a question regarding Figtree Hill. Considering both the 2020 chief scientist's report on Campbelltown koalas and the Campbelltown's koala plan of management has asked for 450 meters and 425 meters East, minimum width, not average, West koala corridors along both the Menangle Creek and Woodhouse Creek koala corridors and the same for the Nepean River. Will Lendlease be changing their plans to accommodate these corridors for both Stage 1 and Stage 2 at Mount Gilead, Figtree Hill, neither existing planning proposals do so?

Thank you for that question on the very important issue around the environment and the fauna in Figtree Hill, which is a development that we will be undertaking in Western Sydney. Protecting fauna and flora is not just the right thing to do, but quite frankly, it enhances placemaking and makes those communities more attractive proposition. But as you indicate in your question, the New South Wales Chief Scientist has recently released a report on this matter. And I can assure you that we will be meeting or exceeding all substantive areas of that chief scientist's report. I should note that we are investing over $35 million to help expand the koala population in the area. Our plans include 2 underpasses under Appin Road and a koala corridor across the development to facilitate the movement of koalas through the area. We're rehabilitating more than 240 hectares of habitat. We're installing 25 kilometers of dog exclusion fencing. We're gifting 36 hectares of land to the Georges River Koala Reserve. And we're collaborating with a number of groups and stakeholders, including the World Wildlife Fund to ensure that we do the right thing in this important area. Thank you. Are there any more questions online?

Chairman, we have received the following question from a security holder. The term smart city is widely used. And I'm not sure that many who use it really know what it means. Putting aside this trendy terminology, I would suggest that over the next 5 to 10 years, we would see material change in the way we work, live and relate to each other. Can you please share your view on what you expect to change and how this will impact on our company?

Thank you. That's a very thought-provoking question. And indeed, at Lendlease here, the Board and management have had extensive discussions really over the last year as we evolved our new strategy, which was released to the market in this last August. But obviously, more recently, with the impact of COVID-19 and as both Steve and I said in our opening addresses, COVID-19 has had a fundamental impact on virtually all aspects of society. And that draws together really sort of 2 aspects of your question because there was a journey on digital that was happening anywhere around -- any way around the globe. And then that's being accelerated by COVID-19. And in our view, accelerated in a way that there is no turning back. And in many organizations, they are finding that their expectations around digital take up that they're experiencing today are where they would have thought they may be in 5 years' time, and it's just all being brought forward. So it's very important for us to understand what are the impacts of these drivers, COVID, which is changing sentiment in many ways and behavior, but how long will that last? And then the unrelenting trend of digital underneath that. So with respect to COVID, the -- from our point of view, it's really too early in the process to understand what changes there will be that will be sustained going forward. But we had a very detailed presentation at the Board Meeting only yesterday actually on some very impressive work that our group leadership team has been leading in understanding across all of the components of our business, whether that's an industry approach, residential, office, retail, what could be the impacts of COVID? And it varies depending on whether you're looking in Asia, Europe, the U.S. or here in Australia because what impacts it a lot is where are the various regions, in terms of the wave of COVID that's moving through those societies. We expect that the -- coming out of this, would indeed be many opportunities. In the residential section of our business, we think, build-to-rent will continue to be a very attractive area because there is still a structural undersupply of housing to meet demand. And particularly in the gateway cities, these large urban, very attractive areas where the populations, we believe, will continue to shift to as COVID subsides. But people are looking for quality and that is obviously what Lendlease delivers. In offices, there are very many different views around what -- how they will respond in terms of working from home, being more flexible, what may become of that. And we would think coming out of that, there may actually be real repositioning opportunities to redesign space to new expectations. And potentially where that may land is a mix between people having a core office and then how does that interface with people working from home. And then in the retail sector, which, as Steve mentioned, we have much less exposure to, there are clearly structural headwinds that were being driven by digital. And then indeed, that will be exacerbated in recent times by COVID. But again, there may well be opportunities there to reconfigure existing retail space on a large scale into mixed-use opportunities. And then if I can just turn to the digital enablement and you make a really good point there around there's a lot of hype about this, but what's really happening on the ground. And if you have that deep interest that it sounds that you have, our digital team led by Bill Ruh did a fascinating 1 day webinar back in September, which I believe is still accessible online, where not only did the Lendlease digital team but also many outside parties contribute to a fascinating day of what digital enablement means in the real estate industry in all aspects, whether that's construction, whether that's around digital is used in cities. And what I found fascinating was that this has been an area of work that Steve and his team have been focused on for at least 3 years now. And as Steve mentioned in his address, a lot of work has been done, particularly over the last year in bringing that digital journey along. And we now have tangible on-the-ground pilots running, one on the West Coast of the U.S. with our Google development, where we're looking at how digital can be used there in the design of buildings and planning and also through to off-site manufacturing, whether that being cross-laminated timber; one in Europe, where Steve mentioned the MIND development in Milan, which is the Milan Innovation District and how can digital be used there to gives the sort of experience that people are looking for. And we've got another pilot happening here in Australia, where we are taking the data feeds that come out of the investment properties we're having in large buildings and taking those data feeds and which -- and that will be in terms of millions of data points a month. How can that data be used to provide better services to provide more efficient services to provide more sustainable services. And so this is -- we are very, very serious about saying this is our future. This industry is going to be disrupted by somebody. And we are very keen that the disruptor in digital will be led by Lendlease and the Vanguard. So thank you for that question. Are there any more questions online?

Chairman, we have received the following question from a security holder. Why does it take so long for Lendlease tax statements to be issued to shareholders after the company financial results are announced and which delays shareholders lodging their individual returns and receive possible tax refunds?

Yes, thank you for the question about the timing of tax statements. And it's a matter that we have had questions raised before. And we do appreciate the issues faced by our security holders. However, as a stapled structure, where we have a company stapled to a trust. And it's the company that pays the majority of the distribution through corporate dividends. The reporting and distribution timetable has to follow a corporate type calendar. So that means that we have to bring together all of the work done for the financial statements of Lendlease as a group before we're able to be in a position to finalize our financial statements and declare the dividends on the company, which are then stapled to the distributions of the taxable income of the trust. We're aware that many Australian REITs and stapled trust structures issue their statements earlier Lendlease -- earlier than Lendlease; however, we're not a REIT. And unfortunately, we're unable to have that accelerated time frame for announcing the distributions. In response to security holder feedback, we have provided a tax estimator on our website to assist security holders with the calculation of the taxable components of their distributions and to enable them to prepare their tax return before that annual tax statement are issued. So frankly, to summarize, we are tied to the timetable for the company and releasing our results in typically the second or third week of August is a pretty quick time frame for a company of our scale and complexity. So I hope that answers your question. Are there any more questions online?

Chairman, there are no more online questions regarding Item 1.

Thank you. So can I turn to the telephone? Operator, do we have any questions on the telephone?

[Operator Instructions] Chairman, there are no questions on the phone at this time.

So if there are no further questions, I now bring questions on Item 1 to a close. And we've had a good discussion there on a range of very important issues related to our business of the Lendlease Group. So I'll now continue with the formal business of the meeting. The first 3 resolutions relate to the election of directors. The experience and profiles for Bob, Phil and Jane were included in the notice of meeting. Prior to seeking election or reelection, Bob, Phil and Jane confirmed they would continue to have sufficient time to properly fulfill their director duties of the Lendlease Group. And all candidates have the full support of their Board colleagues. So turning first to agenda Item 2a, and this relates to the election of Bob Welanetz as a director. Bob's experience and skills are outlined in the notice of meeting. We will now play a short video from Bob.

Hi, I'm Bob Welanetz. I'm very pleased to be with you today. I was very flattered at the end of 2019 when I received a call inquiring whether or not I might be willing to consider joining the Lendlease Board as a nonexecutive director. If I reflect on my career experience, I think it's very well aligned with the needs and responsibilities for the role of serving as a nonexecutive director for a global firm as significant and substantial as Lendlease. I've had 40 years of career experience in real estate and the various dimensions that I've been involved in over my career have been 40% of the time frame that I've been in the business has been with owner-developer companies, building significant commercial projects. Another 40% of my career experience has been as an investor, investing in significant commercial real estate projects. And 20% of my career experience has been working for firms, servicing the needs of owners of real estate assets. Over those 40-plus years in working in 47 countries doing project work, I have achieved a perspective, which I think can be very valuable and helpful to Lendlease as it proceeds to implement its strategy for the future. I think that the challenges of the real estate industry over 2020 are very apparent and have been significant without a doubt. However, I think Lendlease is actually very well positioned as the challenges in 2020 proceed, and we roll into 2021 with renewed hope and optimism that the world, as we know, it is returning to a more normal state. The new strategy that has been developed with management and the Board has been crafted with a view that the experience of 2020 will prepare us well for risk-adjusted execution as we roll into 2021 and beyond. I think Lendlease has a tremendous opportunity to maintain its preeminent position on the global stage by constantly focusing on world's best practice in real estate, moving forward towards the digital age in a responsible way, making sure that Lendlease continues to prioritize the values and culture that has been responsible for its long-term success and also looking very carefully at the benefits of continuing to advocate for social responsibility, diversity and a focus on building sustainable projects. All of this combined believe -- makes me believe that playing a role as a nonexecutive director at Lendlease with my background and experience is a good utilization of my time and hopefully contributes value to the organization. I appreciate your time and consideration as a candidate for Lendlease, and I look forward to contributing over many years to come. Thank you.

Thank you, Bob. And as you can see, the Board has been very adept now at using video for effectively the last 9 months because that's been the way we've had to conduct our business. We will now take questions relating to the election of Bob as a director of Lendlease. Moderator, are there any questions online?

Question to director. Please tell us, did you know any of the Board members before receiving the call? And was the call made by a search company?

So that's an interesting question of detail. I think given my responsibility for ultimately inviting people to join the Board, I can tell you precisely how that happened rather than to reach out to Bob. So the identification of the candidates as would normally be a case for a company like Lendlease with our significant presence globally. Yes, we do use search firms in order to identify candidates because one of the particular things, as you'll notice, we were very keen to have both a U.S.-based director as well as a U.K.-based director. And therefore, you need to have the capacity to reach out and understand the capability of people in the various markets you want to operate in. And so we used an external search firm, provided us with a long list of candidates that met our criteria. In this case, for somebody based in the U.S. with deep experience in real estate development and investment. And Bob was a name that came through that process, which looked really attractive to us. Bob was not known to my knowledge to anyone else around the Board table. And I -- when I was in New York visiting the Lendlease operations, arranged to meet Bob. And so that was really the first contact he had with the company, having first that meeting having been set up by the search firm. And so I met with Bob. I was very impressed with both his capability, his experience, but also his personality and the fit that I could see would -- that would be around the Board table. And so I asked him if he would be interested in going through the next phase of the process, which was to meet one-on-one with each of my Board colleagues. And then as a Board, we caucus to see whether we thought Bob was the right sort of person and then obviously decided, yes. And then I reached out to Bob to offering a position on the Board, which is obviously subject to election here today at the AGM. So that is the process. And I hope that gives you an insight into how these processes run at Lendlease. Are there any other questions online?

Chairman, there are no more online questions regarding Item 2a.

So there are no further questions online?

Chairman, there are no more online questions regarding Item 2a.

Thank you. Operator, are there any questions from security holders on the phone?

There are no questions on the phone at this time.

Thank you. So as there are no more questions, I will show the proxy position for Bob. Now given voting on all items will not close until the end of the last item, the results of all resolutions will be lodged on the ASX following the conclusion of the meeting. So as mentioned earlier, you can continue to vote until the close of Item 4. And I will give you a warning that, that is going to happen. So turning now to agenda Item 2b, which relates to the reelection of Philip Coffey as a director. The skills, experience and qualifications of Phil are set out in the notice of meeting. A prerecorded message from Phil will now be played.