There has been interest from the listed players in all or parts of the real estate funds management business which JP Morgan analysts estimate could be worth in order of $900 million to $1 billion.
Richard Jones and Ben Brayshaw at JP Morgan said whilst the platform may be attractive for managers looking to grow scale – the size, complexity and significant retail exposure could present some challenges to potential suitors.
“Amongst those looking at the business, we see a transaction is most complementary for Lendlease which is seeking to grow its funds management platform and could debt-fund the acquisition,” they said.
“We believe Dexus and Charter Hall are likely more opportunistic and would seek to carve up the business together with a partner, such as Vicinity Centres to manage AMP’s Retail funds.”
Dexus has confirmed it is looking at one of the AMP diversified funds and Charter Hall is expanding its funds under management through a suite of listed and unlisted funds.
Mr Jones said a transaction would increase the size of Lendlease’s Australian platform from $24.7 billion to $51.3 billion.
A Lendlease spokesman declined to comment on market speculation.
The potential deal comes as Charter Hall, which has been looking at AMP Capital for the past two years, has created a new wholesale partnership with Dutch pension fund PGGM to buy $800 million of industrial property through acquisition of assets and/or development sites.
The vehicle has been seeded with seven assets valued at $300 million and an average lease term of 13 years, which includes a 50 per cent interest in the recently acquired Minto site from QUB Holdings for $200 million and an asset in Melbourne with a 20-year lease for $90 million.
Charter Hall chief executive David Harrison said the industrial and logistics sector is undergoing a long-term structural up cycle driven by significant growth in online retailing and the need for on-going supply chain efficiencies.
“Most institutional investors are significantly underweight within the industrial and logistics sector and wish to increase their exposure to the strongly performing sector,” Mr Harrison said.
At the group’s annual general meeting on Thursday Mr Harrison said the growth in funds under management and series of new acquisitions has led him to upgrade the 2021 earnings by about 4 per cent.
He told the meeting that strong offshore interest continues to be seen for Australian office in the key Sydney and Melbourne markets and the group expects office transaction pricing will remain firm and reflect the large gap between office yields and the 10-year bond rate.
“We have enjoyed another strong start to the year, with ongoing support from our capital partners and clear endorsement of our long weighted average lease expiry investment strategies,” Mr Harrison said.
“Our partnership approach has also made us a compelling choice for tenants. This has seen us continue to build our sale and leaseback portfolio, further extending existing relationships, while establishing new ones.”
In defiance of the global pandemic Charter Hall has conducted $3.4 billion of gross
transactions with $2.7 billion of net acquisitions, since June 30.
These deals included buying the David Jones department store in Elizabeth Street, Sydney for about $450 million, the ALDI logistics portfolio, AMPOL portfolio and OI industrial acquisitions and expanding the partnership with BP New Zealand.
Carolyn Cummins is Commercial Property Editor for The Sydney Morning Herald.