Australian property and financial services giant Lend Lease Corporation is among the top 20 companies on the Sydney stock exchange, with a market capitalisation equivalent to around £2bn. Despite having its roots in The Netherlands – it was set up in the 1950s as a subsidiary of Dutch property company Bredero – Lend Lease has kept a relatively low profile in Europe.
All this is set to change now that work has started on the £350m Bluewater retail and leisure development in Kent. The 150,000 m2 development is the largest project Lend Lease has ever undertaken. Lend Lease paid £50m to acquire the site from Blue Circle Properties in 1994, and is poised to announce a funding deal that will see a group of institutional investors acquire the scheme. The UK’s Prudential insurance company is thought to be keen to participate.
Bluewater is one aspect of Lend Lease’s efforts to grow its international business in order to maintain an annual growth in profits that has remained unbroken since 1975. “We have dominated the Australian property market for 40 years and have simply outgrown it,” says UK managing director Peter Walicknowski.
Exporting the Lend Lease concept is tricky, however, as it has diversified from its traditional property roots. There are four core businesses: property, capital and investment services, information technology, and financial services. It has grown these by a series of joint ventures and acquisitions, with companies such as IBM Australia, GE Capital and MLC Investments.
In the year to June 30 1995, revenue was Aus$ 1.6bn, producing a post-tax profit of Aus$ 260m. Financial services accounted for 58% of the profit.
“We are an earnings based company, not investors. We don’t generate assets,” explains Walicknowski. “We are more akin to a merchant bank than a property company.”
In its property investment services group, Lend Lease has property funds under management of Aus $14.2bn, half of them in Australia and half outside Australia. It manages funds on behalf of, among others, Hanson, Unilever and ICI Pension Fund. The international aspect of the business was boosted in 1994, with the acquisition of the Yarmouth Group, one of the US’s leading investment managers.
The London office of the Yarmouth Group suffered a blow in March, when managing director Gerald Parkes quit along with two other former partners Paul Wilson and Duncan Watt to set up a new business. Parkes took with him one of Yarmouth’s largest UK clients, the US Teachers Insurance Annuity Association, a US pension fund with assets of more than $125bn.
Meanwhile, Lend Lease is keen to expand its Asian operations. In April, it announced plans for a US$ 750m to US$ 1bn Asian property fund, Asia Pacific Investment Company, which it aims to put together within six years. An initial US$ 120m has been committed and the first investment – an industrial project in Singapore – has been identified. The fund will probably be listed in due course, possibly in Singapore. APIC is aiming to produce an average return of 20% for the first five years.
Lend Lease is keen to build its European development activities, however. Earlier this year it acquired a 50% equity stake in UK property company Chelverton Properties, a private development company specialising in out-of-town retail parks. Set up by developer Matthew Cartisser, Chelverton has developed more than 20 schemes in the UK, adding up to 93,000 m2. It has also embarked on a business park development outside Warsaw, which has attracted IBM as an anchor tenant.
Lend Lease has injected £10m of new working capital into Chelverton, which will become a vehicle for its expansion into Europe. “Chelverton’s medium-term objective is to consolidate its position in the UK retail and leisure market and use its expertise to take advantage of the many opportunities which exist in continental Europe,” says Cartisser.
|
June 30 (Aus $m) |
1995 |
1994 |
|
operating revenue |
1685 |
1769 |
|
post-tax profit |
260 |
232 |
|
net assets |
2415 |
1080 |
Lend Lease Corporation
Tower Building
Australia Square
Sydney
tel 61 2 236 6111
fax 61 2 252 2192
