Lendlease beats out Dexus in race for $1.6b State Super property fund

Property giant Lendlease will manage a $1.6 billion slice of State Super's direct property portfolio, after NSW's Treasury Corporation (TCorp) dropped ASX-listed heavyweight Dexus from a 15-year mandate looking after the fund.

About 10 of Australia’s top property managers were vying to manage TCorp’s fund.Credit:Peter Braig

TCorp, which gives finance and investment advice to NSW’s public sector, chose Lendlease to steer the diversified $1.6 billion property portfolio after running a tender process for the management rights.

About 10 of Australia's top property managers, including Dexus, were part of the tender process, parties associated with it said.

Dexus had managed the diversified Australian property mandate on behalf of TCorp for more than 15 years.

"We have valued the work of Dexus over the past 15 years and continue to have confidence in their property expertise and they will continue to manage a portion of our funds," TCorp said.

Dexus was quick to reassure investors the loss of management rights for TCorp's Australian mandate would not impact its guidance or adjusted funds from operations in the 2020 financial year.

Market guidance of distribution per security growth of around 5.5 per cent for this financial year remained the same “barring unforeseen circumstances,” it said.

Dexus hinted at other investment mandates that would likely replace TCorp’s portfolio.

“There are currently several opportunities in the pipeline for Dexus to onboard investors with open investment periods and growth strategies,” it said.

Dexus’s funds management business has grown significantly since 2012 and attracted co-investment from new like-minded partners, such as GIC and M&G Real Estate, to invest through the cycle, it said.

TCorp’s chief investment officer Stewart Brentnall said a detailed and independent process was undertaken to select a manager for the property mandate.

“We are delighted to be forming this new partnership with Lendlease,” he said.

The investment manager said it "regularly evaluates its strategy and partners [and] there is currently no process to consolidate investment management across the property exposure."

TCorp oversees about $108 billion in funds for NSW's public servants. About $6 billion of that is in it's unlisted property portfolio.

Lendlease, a global developer and construction giant, has $112 billion in development projects on its books and manages $25.1 billion in Australian property funds for various investors.

It recently reported a 13.2 per cent decline in after-tax profit for the six months to December after completing the sale of troubled engineering business. At the same time, it moved to reassure investors another difficult project, Melbourne Metro Rail, will not cost them more money.

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