Lendlease funds scrap to draw rival bidders but super giant investors will have a big say
The contest for Lendlease’s Australian property funds could result in the $10bn empire being broken up as more contenders are drawn out to grab a slice.
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The contest for Lendlease’s flagship Australian property funds could result in the $10bn empire being broken up as more contenders are likely to emerge for the prime vehicles that the manager is desperate to keep.
The listed company is facing multiple challenges to hold on to the Australian Prime Property Funds (APPF), which own top retail, office and industrial properties across Australia.
Listed property group Mirvac is leading the field and is in pursuit of the entire platform, with the group readying to lodge notices to requisition meetings of at least one vehicle as key investors press for change. The super fund investors are taking advice from investment bank Jarden.
The company has declined to comment but its move on the famed Lendlease platform has spurred industry talk of a major shake-up of the funds industry.
Lendlease, whose chief executive is Tony Lombardo, insists it is committed to the funds and presented to investors on their future, hoping to head off pressure for a change of manager in meetings with large funds.
Mirvac is favoured to take on both the retail and office funds, with a separate contest tipped to break out for the industrial fund, which has been dubbed the “low hanging fruit” by interested parties.
Losing control of the funds would hurt Lendlease as their management is valued at about 30c a share by analysts at a time when the stock is trading in the mid-$5 range. Losing would also dent its ambitions of switching away from getting deeper into funds. It has taken on Rothschild & Co as advisers.
“It’s a bit like AMP Capital,” one analyst said, comparing the turmoil that struck that manager to the pressures on Lendlease’s funds arm.
“Once you lose that, the strategy is probably hard to justify because it becomes a situation where you then get stranded.”
Multiple sources said major superannuation funds would effectively decide what could become a messy contest.
Super fund Hostplus is viewed as the most influential investor, with Aware Super also critical.
Hostplus has declined to comment but is understood to be supportive of Mirvac, though it also has good relationships with rival managers.
But the interest of the two giant funds – and others invested alongside them – are not entirely aligned, making a smooth switch difficult. The funds hold different stakes in each of the vehicles invested in retail, office and industrial property and their futures will be decided individually.
Aware also has a large exposure to the Lendlease headstock and ventures with the company in the US and retirement living, where Lendlease’s stake is now on the block. Lendlease could keep Aware onside by sweetening the deals it receives outside APPF, and others claimed it may not want a change of manager.
Aware declined to comment.
In each of the funds technical hurdles may also make change difficult with a high proportion of investors needing to turn up to vote for a new manager. If the battle drags out, a wider contest for the industrial fund is also more likely as Mirvac is not as prominent in this area, with rival managers believed to be circling.
One funds veteran, who is not in the fight, said that investors were supportive of a change of manager to Mirvac. But it would need to manage complications around having its own wholesale office fund, with a merger with the APPF Office vehicle potentially on the cards to create a much larger vehicle.
On the retail front, Mirvac has been widely tipped to sell retail assets from its balance sheet into the APPF Retail vehicle. Lendlease shares closed 5c lower at $5.37.
Originally published as Lendlease funds scrap to draw rival bidders but super giant investors will have a big say
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