Lendlease holds off Mirvac’s raid on $2b fund
Lendlease has clung to control over a prized $2 billion real estate fund it manages for at least another week, after a critical investor meeting to vote on replacing it failed to reach a quorum on Wednesday.
The meeting was scheduled to vote on Mirvac replacing Lendlease as the manager of the industrial fund, in a move spearheaded by the fund’s two largest shareholders, industry superannuation giants Hostplus and UniSuper.
A vote on whether Mirvac would replace Lendlease was adjourned until next Wednesday.
The failure to reach a quorum was a victory for Lendlease in its bitter stoush with the superannuation funds and Mirvac. However, it is only the first round of a broader battle to shift control of the $10 billion Australian Prime Property Fund platform from Lendlease to Mirvac.
Lendlease, led by chief executive Tony Lombardo, had earlier urged investors to stay away from the meeting – which was held at its headquarters in Sydney’s Barangaroo – in a tactic designed to subvert Hostplus and UniSuper’s efforts to oust it as manager.
The property fund, known as APPF Industrial, is one of three that comprise the prized APPF platform that Lendlease has operated for three decades, with a portfolio of office towers, shopping malls and industrial real estate that span the country.
Hostplus and UniSuper control about 38 per cent of the voting register for the industrial fund. Lendlease’s own stake in the fund is 17 per cent, but as an affected party it could not vote, raising the effective vote of the two industry funds to 46 per cent.
Two-thirds of investors, or 10 funds, were required to be present for the vote to go ahead.
Those funds have been pushing for Lendlease to be dumped as manager and replaced by Mirvac, another ASX-listed property developer and fund manager. UniSuper is more confident of Mirvac’s momentum and growth prospects compared with Lendlease, which is mid-turnaround under Lombardo.
The Wednesday meeting was supposed to vote on the $2 billion industrial fund, whose 15 or so powerful investors also include the likes of NSW TCorp and AustralianSuper.
At stake for Lendlease is about $13 million in earnings from the APPF group and control of a cornerstone of its funds’ management empire.
Trading barbs
None of the key executives of the big super fund investors were in sight at Wednesday’s meeting, only a handful of corporate lawyers who made their way into the 10am meeting.
In the lead-up to the Wednesday vote, Lombardo and Mirvac chief executive Campbell Hanan traded barbs, at least indirectly, extolling their funds’ management credentials.
In a last-ditch defence ahead of the vote, Lombardo told The Australian Financial Review about his growth plans for the industrial fund and named Mirvac directly when comparing the fee structures of the rival fund managers.
Lombardo had also threatened to call investors back to a second vote on October 2 if it lost this week’s vote.
While the outcome Wednesday’s meeting is embarrassing for Mirvac and the two superannuation funds, it is only the first round in this increasingly nasty fight.
However, the forthcoming vote should provide a conclusive decision on which of the two rival fund managers end up controlling the AAPF Industrial vehicle.
Under its constitution, a failure to reach quorum at the second vote would effectively kill the current proposal to dump Lendlease.
In a continuation of their attack on Lendlease, the activist industry funds have also called a separate meeting next month for a vote to replace it as manager of the $2.8 billion retail fund, another vehicle on the APPF platform, and install Mirvac.
As well, a move to replace Lendlease from control of 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.
The $10 billion invested across the three APPF funds account for about a fifth of the $49 billion that Lendlease has under management. Most of Lendlease’s funds under management are through direct partnerships with big investors on specific projects, a strategy that Lombardo is keen to pursue.
By contrast, Mirvac has been working to expand the number of pooled funds it manages, wresting control of the $7.7 billion AMP Capital Wholesale Office Fund three years ago, just as it was about to be handed over to Dexus as part of a larger transfer of AMP Capital’s property and infrastructure funds business.
