Investors agree to further redemptions delay at $2.1 billion Lendlease Australian property fund-source

SYDNEY : Five years after they first requested money from a A$4.2 billion ($2.73 billion) commercial property fund run by developer Lendlease, investors have agreed to further delay the payment deadline to next year, a source said on Monday, as a glum real estate market slows sales.

The Lendlease Australia Prime Property Fund – Retail caters to institutional investors and its portfolio of malls was worth about A$4.2 billion in 2018, when a rare withdrawal window opened and about half the fund asked for their money back.

A three-year extension granted in 2020 when the pandemic froze markets ended on Monday but investors have agreed to push back the deadline again until early 2024, according to the person with knowledge of the matter who declined to be named as the information remained confidential. The fund was worth A$3.2 billion ($2.1 billion) in September.

Lendlease declined to comment.

The delay underscores the challenges facing sections of the real estate market, in particular office and retail, as home working and e-commerce constrain the pandemic rebound and lead tenants to reconsider floor space, while higher rates lower building values and raise debt costs.

Australia’s fourth largest pension fund, the A$120 billion UniSuper, was still waiting for about A$30 million of its then A$240 million stake, a spokesperson said in September. UniSuper declined to comment on Monday.

UniSuper chose to exit the fund as part of a broader shift out of pooled investors to direct ownership, but wanted sales to be orderly, chief investment office John Pearce told Reuters in a September interview.

“We don’t want managers going in and doing fire sales for the sake of meeting redemptions,” said Pearce. “We hope there’s going to be a sense of orderliness.”

The Lendlease fund in April sold Craigieburn Central mall in north Melbourne for A$300 million and Caneland Central mall in Queensland for A$280 million last December.

S&P Global downgraded the fund’s credit rating last December because cash flow adequacy measures had deteriorated due to it prioritising paying redemptions over debt.

One of Australia’s largest developers, Lendlease had A$23 billion worth of projects underway in June and operates in the United States, Europe, Asia and Australia.

Lendlease earlier this month ended a $15 billion San Francisco development deal with Google. In August Lendlease paused work on a A$1.9 billion office and apartment complex in San Francisco.

($1 = 1.5366 Australian dollars)