Lendlease investment clients look for an exit

Lendlease says it is regularly engaging with investors and recently reviewed its fees. Picture: AAP

A potential $100m earnings hit from a dispute over a development could be the least of Lendlease’s worries over the coming months, with more unrest from its wholesale investors.

DataRoom understands that some of Lendlease’s institutional investment clients have started seeking legal advice about shifting their funds to other real estate managers on the back of poor performance and a retreat from international markets.

There were rumblings last year about investors replacing the $3.8bn Lendlease as manager, but the noise died down.

But once again, investors are exploring their options as the Lendlease share price remains almost 20 per cent lower than a year ago, according to chatter.

Vicinity Centres, Dexus, Mirvac, GPT and Charter Hall are among groups that could take on the funds.

GPT has already secured the management of two shopping centres previously under Lendlease’s control, as earlier reported.

Lendlease manages $49.6bn of funds that own some of the ­nation’s best known shopping centres and buildings in funds such as the Australian Prime Property Fund Commercial, Australian Prime Property Fund Industrial and Australian Prime Property Fund Retail.

Lendlease said it was regularly engaging with investors and recently reviewed fees to ensure they were competitive, adding that its funds were some of the best performers over the past three to five years.

In its half-year result it said it was focused on improving profitability and growth and had ­secured $1.5bn of new mandates.

Any play would need careful consideration, because without the money to recapitalise the funds if needed, they could be a poison chalice. And management fees may now be less lucrative, with super funds fixated on low fees, more than performance.

A similar situation in recent years was faced by AMP, which lost control of management rights to rivals.

Lendlease has fallen out of favour because of losses, excessive debt and project writedowns.

The Tony Lombardo-run company has moved to cut costs by axing hundreds of jobs and is retreating from offshore markets.

Groups such as Aware Super, TCorp and Host Plus could try to sack Lendlease as manager, as some invested with the group because of its overseas exposure.

Overseas, Lendlease developments have included major projects such as Stratford Cross in London and Milan Innovation District in Italy. They are mainly owned by its fund investors.

The Australian reported on Wednesday that the long running dispute related to development rights to a key land parcel next to its Figtree Hill Estate in Sydney.