Investment Management report
| Operating Result $m | 08 |
07 |
|---|---|---|
| Operating profit after tax | ||
| Funds management | 54.1 | 28.7 |
| Investment income | 83.2 | 160.4 |
| Operating profit after tax by geography | ||
| Asia Pacific | 71.8 | 29.7 |
| Europe | 61.9 | 153.4 |
| Americas | 3.6 | 6.0 |
| FUM growth FY08 on FY07 | ||
| 4% | ||
- Total operating profit after tax for Investment Management declined to $137.3 million, down from $189.1 million in 2007. This was primarily due to the prior year containing a $136.6 million after tax distribution from the Global Fund, whereas the distribution for 2008 was $9.2 million after tax.
- Funds under management rose 4% to $9.3 billion, up from $8.9 billion in 2007.
- Investment Management continued its policy of capital recycling with the sale of a proportion of Lend Lease’s interest in the Australian Prime Property Fund for a profit after tax of $40.1 million.
- Investment Management continued to see strong performance from its managed funds during 2008 which flowed directly to performance fee earnings.
- New equity of $700 million+ was raised and there is significant committed funds under management growth over the next three years from the development pipeline within the various funds.
Year in review
| Portfolio Summary | 08 |
07 |
|---|---|---|
| Funds under management $b | 9.3 | 8.9 |
| Property investment revaluations
after tax |
11.3 | 13.5 |
| Market value of investments to LLC | ||
| Asia Pacific | 397.2 | 615.1 |
| Europe | 205.7 | 299.2 |
| Americas | 0.9 | 2.7 |
| Total $m | 603.8 | 917.0 |
Outlook
- In Australia, conditions remain challenging to raise money for core product; however we have a significant internal pipeline to leverage off and we continue to look at opportunities to partner/joint venture with institutions.
- In Asia, we will continue to look for further assets to invest the remaining equity in the Lend Lease Asian Retail Investment Fund.
- It is currently very difficult to raise new money in the UK environment and our plans to launch a wholesale retail fund are currently on hold.
- In the US... we are in the process of establishing our Investment Management platform.
Priorities
- Continued strong focus on superior investor outcomes.
- Growth strategy focused on leveraging internal product pipeline and Lend Lease’s asset creation capabilities.
- Continue to broaden global investor base.
Key events
Asia PacificThe funds management business continued to enjoy strong support from its wholesale investor base. A new managed investment mandate was secured in December 2007 on behalf of a major institutional investor.
The mandate relates to an investment in two landmark Australian commercial properties acquired in joint venture with Australian Prime Property Fund.
- Profit after tax from funds management decreased, primarily due to investment in the Singapore platform to support future growth.
- The Asia Pacific Investment Company Limited vehicle in Singapore successfully sold its last remaining asset during the year, resulting in profit after tax of $6.1 million on the Group’s investment.
Europe
- Profit after tax from funds management increased due to the receipt of a tax exempt dividend of $47.9 million from the Group’s interest in the advisor company to the Global Fund in relation to incentive fees received.
Americas
- Profit after tax relates to the continued windup of the residual US REI business.
Investment Management
What large and sophisticated institutional real estate investors increasingly want
Macarthur Square, Campbelltown, New South Wales
Over the past few years, international and institutional investors have been actively looking to diversify their property exposure to the Australian and Asian markets.
Capital flows around the world are changing. Liquidity challenges across investment markets have had a transformational impact on how wholesale real estate investment products are packaged and delivered.
Institutional equity demand is increasingly segmented by factors such as an investor’s scale, type and geography.
Drawing on Lend Lease’s asset creation capabilities, Lend Lease Investment Management is well positioned to meet this trend and has attracted more than $700 million in new equity for development projects over the past year.
The credit crunch has impacted liquidity and funding for new projects. Over the past few years, international and institutional investors have been actively looking to diversify their property exposure to the Australian and Asian markets.
According to Rod Leaver, Global CEO of Lend Lease Investment Management, “this investment trend is being driven by the very large minimum investment requirements and a desire for greater influence in investment decisions.”
“We are seeing increased global demand for new product in Asia Pacific.
“The size and scope of the Lend Lease development pipeline positions us as an attractive manager and partner. Institutional investors are becoming more aware of our competitive advantage in product creation and this underpins our ability to raise capital successfully.
“We are looking to follow the flow of capital and will consider more flexibility in fund structuring, including joint ventures and partnerships, in addition to our existing funds which enhances the range of capital solutions we can provide.
“We continue to draw on our extensive network to identify and deliver investment opportunities that are attractive for our investors. Mixed-use development projects, the apartments business and the Australian commercial sector all present competitive propositions to our investors.”
Principles for responsible investment
First global property company to become a signatory to United Nations Principles for Responsible Investment
The Gauge building, Melbourne, Victoria
There is a growing view among investment professionals that environmental, social and corporate governance issues can affect the performance of investment portfolios. Investors fulfilling their fiduciary duty therefore need to give appropriate consideration to these issues, but until recently have lacked a framework to achieve this aim. The United Nations Principles for Responsible Investment provide this framework.
According to the United Nations Environment program property typically comprises less than 10% of a diversified investment portfolio. However, its environmental footprint is much larger than its 10% allocation. Clearly, therefore, property must also be a focus of investors seeking to align their investments with broader environmental objectives.
In November 2007 Lend Lease Investment Management became the first global property investment manager to become a signatory to the United Nations Principles for Responsible Investment. Lend Lease Investment Management has incorporated the United Nations Principles into a number of areas including investment analysis and decision making processes, ownership policies and practices.
