Australian developer Lendlease (ASX:LLC) has been advised by Morgan Stanley to offload its Communities business.

The advice from the brokerage is not born out of desire but necessity, as the unit’s divestiture is a requirement to keep Lendlease’s gearing ratio under control.

This comes as the company is planning to finance its development communities in the fiscal years 2024 and 2025.

Concurrently, Lendlease has seen its shares decline by as much as 1.4%.

Morgan Stanley is maintaining its price target at A$9.20 per share, keeping an ‘equal-weight’ rating for the company.

Earlier, media reports had circulated about discussions on the possible sale of the Communities business by Lendlease.

This was as CEO Tony Lombardo had intensified his five-year strategy to grow the construction colossus into an investment-led firm.

Morgan Stanley also posits that approximately A$1 billion in proceeds from the unit’s divestiture would significantly increase the balance sheet’s capacity.

The brokerage adds that the corporation requires these funds to support its share of development capital expenditure for the fiscal years 2024 and 2025.

Lendlease is a multinational construction company headquartered in Sydney, Australia.

Specializing in project management and construction services, its operations extend across Australia, Asia, Europe and the Americas.