Billionaire Paul Lederer makes listed property play for office fund

Paul Lederer’s move shows that private capital is willing to bet that the beaten down sector will stage a comeback.

Lederer Group’s Paul Lederer. Picture: Nic Walker

Billionaire Paul Lederer has swooped on an office fund run by the troubled property funds house Elanor and will emerge with a major stake in the listed trust and a say in its future.

The billionaire, who made his fortune with the Primo Smallgoods family business, lifting it into an Australian food giant before it was mostly sold to private equity in a $740m deal, is a canny property player.

His Lederer Group sold a $300m portfolio of shopping centres to funds house IP Generation in 2021, and it has worked with another funds group, Centuria, to buy offices in Sydney and Adelaide before the pandemic struck.

Office values have since plummeted but now the billionaire, who also co-owns the A-League soccer club that he formerly chaired, the Western Sydney Wanderers, is back investing in beaten down offices.

His group has struck up a strategic partnership with listed minnow, the Elanor Commercial Property Fund, and will also back an issue of hybrid notes to back its Harris Street Fund, which owns a Sydney office block. Elanor seeded a fund that bought a Pyrmont office block at 19 Harris Street for $185m in 2022 but has hit trouble as the value of buildings in city fringes has crashed.

Lederer Group has agreed to acquire Elanor’s 12.6 per cent interest in the office fund and will become the largest unitholder in the trust with a 14 per cent equity interest.

The move is effectively a bottom of the cycle play in which Lederer will gain significant influence over the office fund’s future and shows that private capital is now willing to back offices, which are trading at a deep discount.

Mr Lederer called out the tough environment for office property, but was bullish about its prospects in the future.

“We acknowledge that quick wins in office are in short supply. But, as long-term portfolio investors, we are a big believer in the Australian office market – because we are a big believer in the future of Australian cities. Over time, we expect to see good returns for patient capital invested with great teams,“ he said.

At the same time the chief executive of Elanor, Glenn Willis, announced he would step down after a decade in charge, with former Macquarie Bank executive Tony Fehon, who is on the company’s board, to step in as interim managing director.

The future of Elanor, which has a broader $6.2bn property funds empire, is becoming clearer as it is now seeking to lift its suspension on the Australian Securities Exchange. It is scrambling to refinance debts, and is seeking to raise $25m by mid -November, and to exit from its hotel fund.

The listed office fund has now committed to acquire at least 49.9 per cent of the Harris Street Fund Capital Notes, subject to finding suitable funding. It is exploring a rights issue to fund this move and is being advised by Citigroup and MA Moelis.

The deals will give Lederer Group participation on a new investment committee that will effectively oversee how the fund is managed. The billionaire’s interests have also agreed to commit a further $50m in capital to the listed office fund as it seeks to recover.

Elanor’s new managing director, Mr Fehon said the company was “pleased to have facilitated the Lederer Group strategic partnership through the sale of Elanor’s interest in ECF”. “This partnership is a strong endorsement in the ECF team and the long-term outlook for the fund. Elanor and the Lederer Group have an aligned vision for ECF, and we look forward to developing the strategic partnership to grow unitholder value,” he said.

Lederer Group’s equity commitment of $50m includes an offer to take up its entitlement and sub-underwrite any potential rights issue at an indicative offer price of 60c per ECF security. Elanor office fund units slipped 0.5c to 60c in early afternoon trading.

The office fund’s manager, David Burgess, said the move was in the best interests of unitholders and said it was “actively exploring” a potential equity raising to fund this investment and provide further working capital over the next two years.

Originally published as Billionaire Paul Lederer makes listed property play for office fund