Scape thought to be in mix for Lendlease’s 25.1pc stake in retirement living operator Keyton

Retirement living business Keyton has 75 villages across Australia with 17,000 residents.

Parties interested in buying a stake in the $3bn retirement living business Keyton from Lendlease are expected to be invited to participate in a sale process this week, say sources.

This follows earlier requests for expressions of interest for the operation.

DataRoom understands that on offer is the 25.1 per cent stake owned by manager Lendlease, which previously owned the entire operation.

Lendlease sold down the business to Aware Super, which owns a 49.9 per cent stake and APG, which holds 25 per cent.

However, a sale of part of the business could trigger a costly capital gains tax bill, calling into question whether the sale extends to all of the business.

Industry sources suggest Scape could be interested, amid speculation that APG could emerge as a key backer to Scape with its $3bn-plus purchase of retirement village operator Aveo.

Sources say that Lendlease is expected to take a flexible approach on the pricing as it divests non-core assets within planned time frames.

Keyton has 75 villages across Australia with 17,000 residents and more than 900 staff, and is run by Nathan Cockerill.

Gresham is advising on Keyton.

The divestment comes as tensions have been building between pension fund investors like Aware Super and Lendlease, which has been battling to retain its real estate management rights for its wholesale funds.

Lendlease chief executive Tony Lombardo is understood to have placated matters for now after some recent meetings with key investors in Melbourne.

However, competitors are poised to step in should the clients move to take their money elsewhere.

The Australian previously reported Mirvac is keen to seize control after it did so with the wholesale office fund controlled by AMP in 2022.

Mirvac’s head of funds management, Scott Mosely, previously worked as managing director for Lendlease’s $28bn Australian funds management business, where he was responsible for overseeing the funds management and asset management business.

Additionally, DataRoom understands that Charter Hall is well placed and preparing for the move should the investors look to shift their funds, although it has not hired an investment bank.

Lendlease manages $49.6bn of funds, which 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.

The company said it was focused on improving profitability and growth and had secured $1.5bn of new mandates.

Analysts note that any play would need careful consideration, because without the money to recapitalise the funds if needed, they could be a poison chalice.

Moreover, management fees may now be less lucrative, with super funds fixated on low fees, more than performance.

The Keyton sale comes as Lendlease has fallen out of favour because of losses, excessive debt and project writedowns.

The company has moved to cut costs by axing hundreds of jobs and retreating from offshore markets.

Major investors include groups such as Aware Super, TCorp and Host Plus, many of whom invested with the group because of its overseas exposure.

Lendlease last week announced it had finalised a sale of Capella Capital to Japanese company Sojitz Corporation, locking in $70m of profit after tax this financial year, adding to the $125m it had secured from the sale of its Military Housing business and $10m to $30m from its UK development joint venture.

Citi analysts said that the company’s recently announced buyback is dependent on further asset sales including the Australian retirement business and TRX urban retail redevelopment project in Malaysia, likely to complete near term.

They remain positive on Lendlease but have revised down 2026 and 2027 financial year forecasts.