Hostplus tells Lendlease to take a look a Link REIT’s $1.5bn mall bid
Lendlease’s $10bn property empire faces fresh pressure after 85 per cent of investors in its flagship retail fund demanded their money back.
Property company Lendlease is presiding over a shrinking $10bn property funds empire after being hit with hefty redemption requests from investors in its under-fire shopping centres fund.
More than 85 per cent of investors in the $2.9bn fund requested their capital back via a liquidity window allocated for the company’s Australian Prime Property Fund Retail, superannuation industry sources said. Although the manager has not commented on the figure, it plans to sell off the remaining assets in an orderly fashion to meet the wishes of its investors.
But industry fund Hostplus, which has a 15 per cent stake in APPF Retail, urged Lendlease to closely consider an offer from Link REIT for three major mall assets worth about $1.5bn and owned by the fund. The Hong Kong trust last week lobbed the proposal under which bulk of the fund’s assets could be sold by Christmas.
“We understand that the offer is above current book value. The Lendlease responsible entity must consider this offer in the absence of any higher offers. To do otherwise would be contrary to acting in the best financial interest of its unit holders and good governance,” a Hostplus spokeswoman said.
Lendlease chief executive Tony Lombardo last week dubbed the bid opportunistic and sources have queried whether it is indeed above book value for all of the assets. But Link REIT’s offer may appeal to investors who are concerned that the selldown proposed by Lendlease could drag on.
The fund’s investors are believed to be broadly supportive of the Lendlease plan on the basis that it would maximise value over time by putting a competitive process in place.
But Hostplus is urging it to keep an open mind. “We expect the responsible entity to act in the best interests of its majority unit holders by giving proper consideration to any credible proposals while ensuring that actions taken do not unnecessarily delay the clear priority of delivering timely liquidity in line with investor preferences expressed during the liquidity window,” the Hostplus spokeswoman said.
Lendlease Australia managing director for investment management Vanessa Orth this week said the fund manager was “committed to best-practice governance and acting in the best interests of all unitholders, seeking to maximise unitholder returns”.
The high proportion of redemptions could shake its grip on its remaining funds, which include a $2bn industrial fund and even its $5.8bn office fund. Both are heavily invested in by Australian superannuation funds.
Citi analysts said in a note to investors that APPF Retail’s redemptions may lead to divestments and put APPF funds at risk. But it is backing the stock as it is lining up fresh development work.
The funds business appeared to have survived a mutiny after efforts by Hostplus to sack Lendlease and replace it with Mirvac at two funds failed. Lendlease won over select investors and bought others out of their positions.
Link REIT is pressing its claim to buy three major retail assets. It is making a play for two big centres – Sunshine Plaza and Macarthur Square – co-owned by GPT and its wholesale fund, and another one, Lakeside Joondalup in WA which is co-owned by Vicinity Centres.
The proposal is billed as a cleaner alternative than an open-market sale of the four remaining individual mall assets – the fund also owns a 50 per cent stake in Westfield Carindale – as it would be quicker to execute.
It would also not run across the potential for co-owners to exercise their pre-emptive rights as the Hong Kong company could quietly grant co-owners, including GPT, roles if it were successful. Link REIT has declined to comment.
Link REIT is a heavyweight investor with holdings in Sydney and Melbourne. Last November, it identified Australia as one of its target markets for growth due to its low investment risk and abundant liquidity.
Lendlease’s planned selldown could take much of next year as the market must deal with other large malls expected to hit the block, including stakes in Westfield centres. Lendlease also took about five years to repay investors during the last liquidity window, as it was hit by the pandemic and then interest rate rises which cut into the value of the assets. Investors are keen to avoid a drawn-out time frame on being repaid.
While it was able to sell off Erina Fair which is co-owned with South Korea’s NPS for $895m, that centre came with management rights and the remaining assets are passive interests. If their sales trigger pre-emptive rights this could introduce additional complexity, extending timelines, and even limiting the buyer pool.
There is the added complexity of dealing with up to four different counter-parties across the portfolio.
Link REIT’s offer is believed to not be subject to any equity raise or financing conditions, which many of the buyers of large assets now require.
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Originally published as Hostplus tells Lendlease to take a look a Link REIT’s $1.5bn mall bid
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