lend lease possible buyer for cer assets

LEND Lease Corporation will launch a $400 million private equity fund to invest in distressed assets in Australia.

It is the first such local launch since the global financial crisis struck.

Lend Lease has signed up a small group of domestic and international institutional investors for the new fund, to be known as Lend Lease Real Estate Partners No 3 Fund (REP3).

It is expected to make an announcement to the market this week.

The fund is expected to buy shopping centres and office buildings priced between $80m and $100m from distressed owners and companies.

Lend Lease global chief investment officer Robert Hattersley confirmed the proposed launch of the fund, but was unable to comment on key terms and the scale.

The Lend Lease consortium remains a bidder for the ING Retail Property Fund Australia, competing against Colonial First State for preferred bidder status.



If Lend Lease won the race for the ING fund, which owned the $450m Joondalup shopping centre in Perth, the new REP3 was likely to purchase a number of these assets, industry sources said.

Investors in the new fund are understood to include European pension funds, which would give Lend Lease the discretion to target high-quality income-producing assets in capital cities.

An industry source said Lend Lease was expected to deploy the capital in the next 12 months because that time frame was perceived to be when good buying opportunities would exist.

"Equity is still scarce and some entities and vendors continue to face significant refinancing pressure. There will be more assets than capital available," the source said.

The fund will run for six years, after which its assets will be sold. It will have 50 per cent gearing.

Lend Lease launched its first private equity fund, Real Estate Partners No 1, almost a decade ago, but those two funds had three-year investment periods.

Mr Hattersley said an opportunity existed to purchase good-value assets and this was the right environment to be a launching new property fund.

Lend Lease has been courting domestic and foreign investors for club and joint-venture prospects.

Lend Lease said this was consistent with emerging investor appetite among large players to take more direct positions with trusted partners.

Lend Lease agreed with Southwark Council on the $2.7 billion Elephant and Castle redevelopment in London this month and is one of two contenders for Sydney's equally large Barangaroo project.

Its balance sheet gearing is 9 per cent.

Lend Lease has three wholesale funds under its Australian Prime Property Fund banner in commercial, retail and industrial, which collectively have assets valued at almost $5bn.

These three funds are among the lowest geared in Australia.

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