LENDLEASE GROUP — Capital/Financing Update 2008

Sep 30, 2008

Stock Exchange Announcement

Lend Lease to invest in and manage leading listed retirement player

1 October 2008

Lend Lease Corporation Limited (LLC) today announced that it had agreed to a series of transactions with Babcock & Brown Communities Group (BBC) and Babcock & Brown Limited (BNB) whereby LLC will acquire a 41% interest in and become the manager of BBC. The total cash investment by LLC will be A$236.8 million, funded through existing cash reserves.

BBC is Australia’s second largest listed retirement sector and aged care owner and operator. BBC currently operates 56 retirement villages and 29 aged care facilities in Australia and New Zealand. The company is currently managed by BNB, which has a 12.5% direct stake in BBC.

LLC purchased a strategic 7.22% stake in BBC in mid 2008 to gain increasing exposure to the rapidly growing retirement sector. The retirement sector is underpinned by positive market dynamics and strong demographic growth, with Australia’s ageing population projected to grow at twice the rate of the rest of the population, making it the fastest growing age group in Australia.

As part of the broader transaction, LLC will divest seven wholly owned mature retirement villages to BBC and one aged care facility to create one of the market leaders in the retirement sector with approximately 11,000 units under management and a significant development pipeline. After LLC becomes manager of BBC, LLC proposes to conduct a strategic review of BBC’s assets and operations.

The transaction is expected to be earnings accretive for LLC in the current financial year assuming completion of both stages of the transaction.

LLC’s Managing Director and CEO, Greg Clarke, said: “The retirement industry has a number of strategic benefits for Lend Lease. This transaction provides us with significant exposure to the sector through becoming the manager of, and major investor in, Australia’s leading pure-play operator. Lend Lease will continue its focus on delivering a high quality of care and service for our residents.

“The investment in BBC is modest and consistent with our commitment to retain a conservative balance sheet, particularly given the current level of uncertainty within the global capital markets and economies. We will be taking a cautious approach to investment and are unlikely to undertake any material corporate acquisitions in the short term. This investment is our preferred scale investment in the retirement sector and discussions with FKP Property Group have accordingly ceased,” he added.

Lend Lease Corporation Limited Telephone +612 9236 6111 ABN 32 000 226 228 Facsimile +612 9252 21921 Level 4, 30 The Bond www.lendlease.com 30 Hickson Road Millers Point NSW 2000 Australia

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Transaction Structure

The key elements of the transaction are summarised below:

Stage 1

• Acquisition of BNB’s management rights over BBC and increase in LLC’s stake in BBC to 17.8%:

  • Acquire 50% of BNB’s stake in BBC, 42.5 million stapled securities at 61 cents per stapled security for A$25.9 million;

  • Novation of the management rights to LLC for A$17.5 million;

  • BBC to issue either 35.9 million new securities to LLC at 68 cents per stapled security or a redeemable note, raising A$24.4 million;

  • BBC to issue a 5-year redeemable convertible note to LLC for A$13.4 million cash. The note will have a 9.5% coupon and conversion price in year 5 of 68 cents.

Stage 2

• Increase in LLC’s stake in BBC to 41.2% and sale of LLC villages:

  • LLC to purchase BNB’s remaining stake in BBC at 55 cents per stapled security for A$23.4 million;

  • BBC to issue 214.1 million new securities to LLC at 68 cents per stapled security, raising A$145.6 million;

  • LLC to sell seven retirement villages and one aged care facility it currently owns to BBC for circa A$133.4 million. The acquisition of the villages will be funded by BBC through A$13.4 million cash and the issue of a A$120 million 5-year redeemable convertible note to LLC with a 9.5% coupon and conversion price in year 5 of 68 cents;

  • The proceeds of any asset sales during the 5-year period can be used to redeem the convertible notes.

The transaction is subject to satisfactory discussions held with BBC’s banking syndicate (including obtaining any necessary waivers etc.).

Completion of the issue of stapled securities in Stage 1 is subject to BBC either obtaining a waiver from ASX in relation to Listing Rule 7.9 or BBC securityholder approval. If a waiver is not obtained from ASX in relation to Listing Rule 7.9, BBC securityholder approval will be sought for the notes to be issued in Stage 1 to have rights of conversion into BBC stapled securities at 68 cents per stapled security.

Stage 2 of the transaction is also conditional on:

• BBC securityholder approval at a general meeting;

• BBC completing due diligence on the acquisition of the retirement villages from LLC;

• Certain regulatory approvals including the New Zealand Overseas Investment Office; and

• No material adverse change, material acquisitions or disposals in BBC.

The BBC general meeting is expected to be held in December 2008.

Lend Lease Corporation Limited Telephone +612 9236 6111 ABN 32 000 226 228 Facsimile +612 9252 21922 Level 4, 30 The Bond www.lendlease.com 30 Hickson Road Millers Point NSW 2000 Australia

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At the BBC general meeting, approval will also be sought for a name change and a subsidiary of LLC being appointed as the Responsible Entity for BBC.

The total cash investment by LLC, assuming all of the transactions are completed, is approximately A$236.8 million as follows:

Placement from BBCAcquisition of management rightsAcquisition of BBC securities from BNBIssue of convertible notesTotalLess cash proceeds from LLC village saleNet cash investment by LLC	A$m170.017.549.313.4
	250.213.4
	236.8

LLC will also be issued with a convertible note with a face value of A$120 million, representing the balance of the purchase price for the LLC villages sold to BBC. Assuming the convertible notes are redeemed following the sale of assets in BBC, LLC’s cash investment would be reduced by A$133.4 million to a net cash investment of A$103.4 million.

ENDS

For more information contact:

Sally Cameron Lend Lease Corporation Tel: 02 9236 646

Lend Lease Corporation Limited ABN 32 000 226 228 Level 4, 30 The Bond 30 Hickson Road Millers Point NSW 2000 Australia

Telephone +612 9236 6111 Facsimile +612 9252 21923 www.lendlease.com

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