Showtime for investors wanting to kick out Lendlease at $2b fund
Mirvac has landed a major blow in an investor-led battle to oust rival ASX-listed property manager Lendlease as the manager of the $10 billion Australian Prime Property Fund, the owner of stakes in landmark buildings like Sydney’s 55-storey Salesforce Tower and 1 Farrer Place.
Street Talk can reveal industry superannuation fund Hostplus, one of the deep-pocketed investors backing a proposal to sack Lendlease and install Mirvac in a bid to spruce up performance and corporate governance, late last week succeeded in scheduling a vote for the $2 billion Australian Prime Property Fund Industrials to approve or block the swap.
The vote has been set for mid-September and comes after months of campaigning behind closed doors from disgruntled investors, as detailed by Street Talk in July. Lendlease boss Tony Lombardo has hired Rothschild and King & Wood Mallesons to help pacify APPF’s investors, where a handful of heavy hitters including Hostplus are being advised by Jarden and Clayton Utz.
The manager swap needs to be approved by 50 per cent of the register. Of note, the responsible entity – a Lendlease subsidiary with an independent board – hasn’t made a recommendation on how investors should vote, in what can only be described as telling sign of the shortcomings in the current management terms.
It’s the first leg of Mirvac’s three-part assault on Lendlease’s lucrative management rights over the APPF, a 21-year-old fund whose performance, fees and corporate governance have irked Hostplus, TCorp and UniSuper.
Next up is the $2.8 billion Australian Prime Property Fund Retail, where Hostplus formally requested a similar meeting in early August, and a date for the vote is expected to be set soon. The final leg would target the $5 billion-plus APPF office fund.
At stake is the management of well-recognised office towers in Sydney including 1 O’Connell Street and Barangaroo Towers, as well as shopping centres like Sunshine Plaza and Westfield Carindale in Queensland.
Should all three votes strip Lendlease’s management rights, it would be a setback for the ASX-listed manager, which is selling non-core investments to appease shareholders pining for better returns.
It comes as Lombardo prepares to hand down full-year results on Monday.
Lombardo’s Hail Mary
In tandem with Hostplus’ efforts, Lendlease has been trying to pacify the $2 billion industrial fund’s investors with a proposal to improve liquidity, lower fees, and change how investors can sell their stakes.
A peace offering, last-ditch defensive move, or business as usual; call it what you will, but this proposal from Lendlease failed to arrest Hostplus’ letter calling for the vote to kick it out.
Street Talk also understands the date for this vote was pushed from August 7 to early September, after Hostplus and other investors requested changes to the resolutions, especially around pre-emption rights. The industry fund wants these rights to remain in place, while Lendlease had originally proposed to abandon these after investor feedback.
Lendlease boss Lombardo has had activist investors on his tail over poor shareholder returns. It has sold off vast tracts of the business, including 12 housing estates to Stockland and Supalai for $1.3 billion; a 50-50 joint venture with the UK-based Crown Estate; and sales of its US military housing business and public-private partnership specialist Sojitz.
It is in the final lap of selling its stake in Keyton retirement villages business, which has sparked sell-side investors’ hopes of a sizeable buyback.
