Mirvac Group’s Lendlease push limited to industrial fund ahead of asset sale plan

Sunshine Plaza in Queensland is among the assets in Lendlease’s APPF Retail fund. Picture: Patrick Woods

Speculation is mounting that Lendlease could retain its office fund within its $10bn Australian Prime Property Fund platform, leaving Mirvac Group to pick up just the industrial fund.

The third fund in APPF, APPF Retail, is set to be liquidated, say sources, as speculation surfaces about what parties will line up for its five premium shopping malls.

Already, the Erina Fair shopping mall on the NSW central coast is for sale.

In terms of the others, sources believe the GPT Group would likely buy out Lendlease from the Sunshine Plaza in Queensland and Macarthur Square, which the pair jointly own.

Vicinity Centres is being touted as a potential buyer of the other half of the Lakeside Joondalup shopping centre in Perth from Lendlease, while Scentre Group could buy the other half of Westfield Carindale in Queensland.

Combined, the shopping centre interests owned by Lendlease are worth about $2.9bn.

The APPF industrial fund is considered the prize in the $10bn APPF platform, with $2bn under management, and Mirvac Group is believed to be in the box seat to gain control, as first revealed by The Australian.

Fund investors are advised by investment bank Jarden.

APPF Office, which has $5.8bn of assets, is likely to remain with Lendlease, because Mirvac already has the Mirvac Wholesale Office Fund and the APPF investors, which likely also invest in MWOF, would not want so much of their funds managed by the same party.

Talk started in the market a year ago that investors were potentially looking to take their business away from Lendlease, as revealed by DataRoom.

DataRoom reported in April that investors, including Hostplus that is leading the charge to remove Lendlease as manager, had started seeking legal advice about taking their funds elsewhere.

At present, LLC charges APPF about a 0.45 per cent management fee, which translates to about $40m-$45m of revenues annually before costs.

It is understood Mirvac is offering to charge 30 basis points to APPF investors, and Lendlease later dropped its fees to remain competitive as part of negotiations.

Morgan Stanley analysts estimate that Lendlease’s net profit could slide by 9 per cent if Mirvac Group is successful in its efforts to gain all of APPF.

The situation is unfolding as Lendlease has recently been exploring a possible sale of its 25 per cent holding in the retirement business Keyton, a business it previously sold.

Expressions of interest or first round bids were due on Friday.

However, the understanding is that parties are not prepared to pay up for the group that would need a price of $3bn to obtain book value, although they could show interest if the business was on offer at a discount.

Keyton has been for sale through Gresham and shareholders, which include APG and Aware Super, may also sell out if the price was right.