Real estate war goes nuclear as Lendlease advises Mirvac vote boycott

Hostplus, which predominantly invests on behalf of hospitality workers, has been pushing for Lendlease to be dumped as manager and replaced by Mirvac, a rival ASX-listed property developer. Next week, investors in the APPF’s industrial fund are scheduled to vote on the proposal.

In a note to the investors – which are largely other major super funds – Lendlease chief investment officer Penny Ransom said the “most effective way” to support the company and ensure it remained the manager of the assets was “not to attend the meeting, thereby preventing a quorum from being met”.

“Is attending the meeting the ‘right’ thing to do?” the email asked. “Not necessarily. The quorum provisions are designed to protect the interests of all unitholders, including smaller holders, by allowing them to influence the outcome through their decision to attend or not attend.”

The two largest investors in APPF’s industrial fund – Hostplus and UniSuper – control about 38 per cent of the register. Once Lendlease’s 17 per cent stake is excluded, the voting power of the two super funds grows to 46 per cent, meaning that it is almost certain that management will move to Mirvac.

But two-thirds of investors, or 10 funds, must be present for the vote.

The APPF vehicles control some of the country’s best-known real estate assets, from Governor Phillip Tower in Sydney – where Goldman Sachs, Bank of America and Bain are headquartered – to the Melbourne Quarter precinct near Southern Cross Station. It also owns a large portfolio of industrial assets.

The stoush over the assets shows the increasingly activist nature of some of the country’s big super funds, and the disclosure of private correspondence is a window into the aggressive rivalry between Lendlease and Mirvac.

Lendlease is suspicious that Hostplus is working in concert with Mirvac to dislodge the portfolio. The Australian Financial Review has previously reported that Mirvac would pay advisory fees incurred by Hostplus and other investors in the APPF’s industrial vehicle. Jarden and Clayton Utz have been providing financial and legal advice, to those investors.

Mirvac, in its own letter first reported by the Financial Review on Thursday, said it was “not in any way acting in concert with any investor”. An earlier letter to investors noted it had developed a proposal to take over APPF management after approaches from “a number of fund investors”.

Lendlease’s call for an effective boycott of next week’s meeting was attacked by Jarden, which said: “Simply not turning up to a meeting to appropriately consider and determine an outcome fundamentally undermines an investor’s governance rights and the overarching process.”

“It appears that the intention of the Lendlease … communication may be to entrench its management position by seeking to interfere with the meeting process and undermine the quorum requirements for a meeting, which has been called to enable investors to exercise their right to a vote,” wrote Jarden’s head of private capital Mitchell Schauer to investors.

He described the suggestion as “an inappropriate course of action and bad governance”.

“A technical quorum requirement should not be abused to obtain an outcome that should be determined by a vote for or against the resolution.”

A Lendlease spokeswoman said “as a responsible fund manager, it is our role to act in the best interest of all unit holder investors, and this includes providing transparent, factual information when asked”.

“A number of APPF industrial unit holders have raised questions regarding the quorum requirements and voting dynamics ahead of next week’s extraordinary general meeting, after being told by others it was their fiduciary duty to attend,” she said. “To ensure clarity and consistency for all unit holders, we felt it was important to address these matters.”

The $10 billion in the various APPF funds account for about a fifth of the $49 billion that Lendlease has under management, and contributed about $13 million in earnings before interest, taxes, depreciation and amortisation. Most of Lendlease’s funds under management are through direct partnerships with big investors on specific projects.

Mirvac, on the other hand, has been working to expand the number of funds it manages, taking control of the $7.7 billion AMP Capital Wholesale Office Fund three years ago, which was to be managed by Dexus.