Property giant GPT seizes on Lendlease’s retail retreat
A Lendlease-run shopping centre fund, once one of the biggest in the country, is handing the management rights of Sunshine Plaza in Queensland and Macarthur Square in Sydney to rival property giant GPT.
The two major malls, worth about $1 billion in total, will still be held in the Lendlease fund, but their valuable management rights and revenue flowing from that will be in the hands of GPT. The switch leaves the Lendlease fund with the management rights of just Erina Fair and Tweed City.
One of the country’s longest-running funds, Lendlease’s shopping mall fund, APPF Retail, was also one of its flagship vehicles. At its peak, it held management rights of almost $6 billion worth of some of the country’s best malls.
The retreat from retail comes amid a wide-ranging overhaul of strategy by the ASX-listed developer, builder and fund manager overseen by chief executive Tony Lombardo, after pressure from major investors. Overseen by Lombardo and new chairman John Gillam, Lendlease has been divesting much of its global business and also sold a portfolio of housing estates in Australia.
“Lendlease Group’s refreshed strategy has been focused on simplifying and improving the performance of our operations. Across our Australian funds management business, including industrial and office, we have a partnership model with a range of external providers for property management,” Lendlease investment management managing director Vanessa Orth said.
“Moving our retail assets to this model is in line with the approach on our other assets, and part of our strategy to simplify the business and deliver performance for investors.”
While Lendlease doesn’t plan to wind down the retail-only fund completely, it is expected to face another round of redemption requests from investors in the fund in November.
Known as a “liquidity window”, investors sought more than $1 billion of their money back from APPF Retail in a previous withdrawal period in late 2018 in response to tumbling asset values and the fund’s underperformance. The unlisted fund’s institutional investors have included some of Australia’s biggest industry funds such as UniSuper and Hostplus.
To deal with the last round of redemption requests, the fund was forced to divest $2.1 billion worth of malls, including a half stake in Adelaide’s Westfield Marion for $670 million, a $390 million sale of Cairns Central, Melbourne’s Caroline Springs Square for $136.5 million and a 75 per cent interest in Craigieburn for $300 million.
It has also sold Caneland Central for $280 million and a half stake in Harbour Town Gold Coast for $358 million.
Over a 10-year period, APPF Retail has delivered an annual net return of 2.4 per cent, making it the second worst-performing among major retail-only funds, according to MSCI data. Only QIC’s Town Centre Fund fared worse with an annual 1.3 per cent net return over that period.
GPT’s growing retail stable
Winning the management rights for the two malls is a big coup for GPT, and its GPT Wholesale Shopping Centre Fund, as it steadily establishes itself as the manager of some of the country’s most coveted malls. Control of Sunshine Plaza on Queensland’s Sunshine Coast and Macarthur Square in Sydney’s south-west will be handed over in May.
“APPF Retail and GWSCF along with GPT management have a shared commitment to continuing to deliver an outstanding experience for retailers and customers and look forward to the future growth of the centres,” Lendlease and GPT said in a joint statement.
GPT in December acquired stakes in two of Perth’s largest shopping centres, Cockburn Gateway and Belmont Forum.
GPT’s retail management book now includes major malls such as Pacific Fair Shopping Centre and Sunshine Plaza in Queensland, Macarthur Square and Rouse Hill Town Centre in Sydney’s west, Melbourne’s Highpoint Shopping Centre, and Cockburn Gateway, Belmont Forum and Karrinyup Shopping Centre in Perth.
At the end of last year, the NSW Supreme Court ruled that a Dexus-managed fund had to sell its $830 million half stake to a GPT-managed fund. Dexus has appealed that decision, with the legal proceedings to commence later this month.
