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Lend Lease Fields Offers from Buyers

One of the biggest questions in commercial real estate could be answered by the end of the year: Will Lend Lease Real Estate Investments be sold?

Its parent company, Lend Lease Corp. of Australia, has confirmed speculation in the Australian financial press that it has been evaluating alternatives to maximize shareholder value, which could include unloading its Atlanta-based real estate investment arm.

In a press release, Lend Lease Corp. confirmed the rumors. Executives of Lend Lease Real Estate Investments refuse to comment on a possible sale, but Jonathan Miller, senior vice president of corporate communications, says the company is likely to make a decision before the end of the year. “The board of the parent company is continuing its strategic review,” he says. “It's studying all options.”

Lend Lease Corp. is considering a sale of its real estate investments unit because its recent performance has not met expectations. The sluggish real estate market in the United States is resulting in less income from investment properties as vacancies increase and rents fall. Moreover, Lend Lease's own “Emerging Trends in Real Estate: 2003” report, written in partnership with PricewaterhouseCoopers, predicts that the U.S. commercial real estate market will not begin to improve until 2004.

According to Lend Lease Corp., its entire U.S. real estate investment arm is on the block, including Holliday Fenoglio Fowler LP, which ranked No. 4 in NREI's Best of the Best Financial Intermediaries ranking this year and CapMark Services, a commercial loan servicing company. Holliday Fenoglio executives reportedly are discussing a management buyout of that unit.

Potential buyers reportedly include Citigroup Inc., Lehman Brothers Inc. and Prudential Financial, whose real estate investment arm confirmed plans in October to acquire TMW Immobilen AG of Munich, Germany and TMW Real Estate Group of Atlanta.

Lend Lease — formed in 1997 when Lend Lease Corp. bought Equitable Real Estate Investment Management of Atlanta and merged it with the Yarmouth Group — has about 2,000 employees and is one of the largest investment managers in the world. It manages $49 billion worth of assets on five continents, including $38 billion in the U.S. In fiscal year 2002, it completed $11.6 billion worth of transactions.

All this talk and speculation follows the release of the widely read forecast produced by Lend Lease and PricewaterhouseCoopers.

At the Atlanta presentation of “Emerging Trends in Real Estate: 2003” in November, Lend Lease partner Ted Klinck alluded to the possible sale when he took the podium. The chance to mingle at the “Emerging Trends” event was especially valuable for him, Klinck said, adding in a joking tone: “It's a great time to network as well, especially if your company is for sale.”

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