Super fund giant Hostplus kicks off war for $10bn Lendlease funds empire, wants Mirvac running $2bn industrial strategy

The future of Lendlease’s $10bn funds empire hangs in the balance as one of the country’s biggest industry super funds breaks ranks and calls for a new manager to be installed to run a key trust.

Lendlease chief executive Tony Lombardo is fighting to keep the group’s flagship property empire intact. Photograph by Arsineh Houspian.

The battle for control of Lendlease’s $10bn flagship Australian property funds empire has started with superannuation giant Hostplus writing to the board of the $2bn industrial real estate strategy asking it to sack Lendlease and appoint Mirvac.

The letter from the $130bn industry super fund seeking to requisition an investor meeting is the first step in a process that could see Lendlease removed as manager of the trust that owns about 40 properties around Australia.

At stake are the lucrative management fees currently earned by Lendlease for running the funds.

The contest for the industrial fund, and its sister trusts that own retail and office properties, could run for months. As a smaller scale strategy, the industrial fund is being targeted first, partly due to its concentrated register where Hostplus and UniSuper are influential.

Lendlease holds about 17 per cent of the fund in its own right but can’t vote on its future.

The superannuation fund and property groups declined to comment.

An APPF Industrial Fund property in Smithfield.

Despite its strong performance putting it atop wholesale performance rankings, the fund is a minnow in an industry dominated by much larger players. But Lendlease is determined to hang on to all of the property funds, which own stakes in major buildings, shopping centres and warehouses around Australia.

Chief executive Tony Lombardo has identified funds as a key plank of the company’s future growth ambitions as it returns capital by selling down its offshore development and building exposures.

Mirvac has made large steps in the industrial field in recent years, and also won the backing of big superannuation funds for its own projects, including Australian Retirement Trust, which is investing in its western Sydney projects.

The Australian revealed the imminent war for the future of the Lendlease funds in June.

Lendlease’s APPF empire comprises three separate funds. The $2bn industrial fund, the APPF Commercial which has about $5.8bn of office assets, and the APPF Retail that is a $2.9bn fund focused on large malls. The industrial fund has about 40 properties across NSW, Victoria, Queensland and SA.

David Elia, CEO of Hostplus; the industry fund is backing Mirvac.

The funds have outperformed their sector benchmarks on a three, five and ten-year basis, with the exception of retail which has lagged behind.

Winning control of the industrial fund could be among the least contentious parts of Mirvac’s ambitions for the Lendlease vehicle. Their rivalry is more advanced in office, where both managers are active.

The industrial fund is also not facing the substantial asset sales and uncertainty of a liquidity event, which Lendlease’s retail fund now confronts. The retail fund is planning to sell its $400m stake in NSW’s Erina Fair shopping centre.

Lendlease can point to its record of strong returns in industrial. But rival groups ranging from the listed Charter Hall to private operators will be watching for opportunities that are shaken out of the contest for the industrial fund.

Industrial property has remained the darling of the traditional sectors, with shopping centre values falling substantially and office still under pressure.

Originally published as Super fund giant Hostplus kicks off war for $10bn Lendlease funds empire, wants Mirvac running $2bn industrial strategy