Bidding war heats up for Lendlease’s retirement village stake
Under pressure from shareholders, property giant Lendlease could be weeks away from ruling off another significant sale, with the potential divestment of its Keyton stake moving it closer to its goal of releasing $2.5 billion in capital by the 2026 financial year.
Street Talk understands sell-side adviser Gresham collected second-round bids from at least three parties for Lendlease’s 25 per cent stake in $3 billion-plus retirement village operator Keyton last week.
Keyton is one of Australia’s largest retirement village operators and has an ambitious target of operating 20,000 living units as it expands across the eastern seaboard.
Sources close to the process but unauthorised to speak publicly said the bidders were a mix of local and international parties, each increasing offers from the first round. This includes Japan’s Nippon Steel Kowa Real Estate (NSKRE), $367 billion superannuation giant AustralianSuper, Singapore’s $150 billion-plus sovereign wealth fund GIC and student accommodation developer Scape.
Lendlease and real estate developer NSKRE entered a partnership in October to deliver a $500 million build-to-rent apartment block in Melbourne’s Docklands. The deal represented NSKRE’s entry into the Australian market.
GIC is one of the largest offshore investors in Australian commercial property.
Scape is still riding high after its $3.85 billion acquisition of Brookfield-owned retirement-living operator Aveo in a deal that marked one of Australia’s largest direct real estate transactions.
The sale will see a new investor come in alongside Keyton’s existing owners Aware Super and Dutch pension giant APG. Of note, Keyton’s existing owners have the right to block a party they perceive as a competitor from buying Lendlease’s stake.
The final round is now under way. Gresham hopes to crown a winner in the next four to six weeks.
New era
A decent exit would give Lendlease another thing to crow about after the competition regulator greenlit its $1.3 billion deal with Stockland for its portfolio of housing estates. Lendlease has also entered a joint venture with UK-based The Crown Estate for six of its development projects, sold its $480 million US Military Housing business and offloaded its Capella Capital infrastructure financing business to Japan’s Sojitz Corp for $235 million.
This is all part of a long-running strategy to simplify the $3.6 billion ASX-listed business and quell the concerns of outspoken activist shareholders. Shares have traded down 16.8 per cent this year to $5.19 and are well off pre-pandemic highs above $18.
Morgan Stanley analysts say there’s a 25 per cent chance Lendlease could announce a mega $500 million share repurchase plan at its August results if it finds buyers for its stakes in Keyton and The Exchange TRX in Kuala Lumpur. If so, they expect a 5 per cent to 10 per cent bump in the share price. The most likely scenario (60 per cent) is Lendlease doesn’t return capital but reiterates it’s part of the strategy.
It’s not all smooth sailing, however. Heavyweight investors Hostplus, TCorp and UniSuper are weighing up whether to turf Lendlease from the $10 billion property fund and bring in Mirvac, as revealed by this column.
