Credit warning for Lendlease’s $2.8b malls fund
Ratings agency S&P Global has warned that Lendlease’s $2.8 billion shopping centre fund faces a potential credit downgrade as it pursues a plan to sell its flagship mall on the NSW Central Coast to fund withdrawal requests from investors.
The “on watch with negative implications” notice comes amid a protracted battle for control of Lendlease’s prized $10 billion Australian Prime Property Fund platform and its three property vehicles, including the malls fund.
Industry superannuation giants Hostplus and UniSuper are spearheading a move to replace Lendlease with its rival Mirvac as their fund manager on the platform, which holds office towers, industrial facilities and shopping malls.
A meeting for investors in the malls vehicle, APPF Retail, to vote on dumping Lendlease is set for October 1. The fund is already in the midst of a shake-up, with its $850 million Erina Fair up for sale. It is co-owned by the APPF fund and South Korea’s National Pension Service.
A successful sale would leave just four assets left in the vehicle, including stakes in Sunshine Plaza in Queensland, Macarthur Square and Tweed City in NSW, along with Lakeside Joondalup in Western Australia.
S&P Global warned the mooted sale of Erina Fair would reduce the scale and diversity of the APPF Retail fund. At the same time, the extent of redemption requests that Lendlease will field from investors for an upcoming withdrawal window remained unknown, it said.
“The CreditWatch placement reflects the possibility that we could lower the long-term rating on APPF Retail by one notch if asset sales reduce the portfolio scale and diversity without a corresponding improvement in credit metrics,” the ratings agency said in its notification.
“We expect to resolve the CreditWatch when we confirm the amount of redemption requests, divestment of Erina Fair, and application of divestments proceeds.”
Meanwhile, the malls fund is forecasting a total return of 9.6 per cent over the 2026 financial year.
“APPF Retail comprises a high-quality portfolio of major regional shopping centres located in growth corridors across Australia, underpinned by a diverse tenant base,” a Lendlease spokesperson said in response to S&P Global’s credit warning.
“The portfolio is over 99 per cent occupied with strong forecast returns and a strategy to unlock value to execute on mixed-use opportunities that will further strengthen the retail offer and performance.”
Lendlease has already locked horns with Mirvac over another vehicle on the APPF platform, its $2 billion industrial fund. A critical investor meeting to vote on replacing Lendlease failed to reach a quorum last week, allowing the ASX-listed property giant to retain control in the interim.
Its grip on the APPF Industrial fund will be tested again this week at a second and final meeting, where investors will once more be asked to vote on the proposal to replace Lendlease with Mirvac. Lendlease’s chief executive, Tony Lombardo, has previously threatened to call investors back to a fresh vote on October 2 if it loses control of APPF Industrial.
A move to strip Lendlease from control of the third APPF vehicle, a $5 billion-plus commercial fund which includes stakes in major office towers such as Sydney’s 55-storey Salesforce Tower and 1 Farrer Place, is also thought to be brewing, although no formal proposal has been lodged.
