Governance Conflicts Threaten Elanor Fund as Lederer Launches Takeover Offer

Lederer Group’s Strategic Move

The Lederer Group has formally announced its intention to make an off-market takeover offer for the Elanor Commercial Property Fund (ECF), proposing to acquire all stapled securities at 70 cents each. This offer represents a notable premium over the fund’s recent trading prices, including a 5.3% premium to the last closing price and a 9.4% premium to the 30-day volume-weighted average price.

Currently holding a significant 27.5% interest in ECF through controlled entities, the Lederer Group is positioning itself to consolidate control over the fund. The offer is structured via LDR Assets Pty Ltd, a trustee entity under the Lederer family office umbrella, which boasts extensive experience managing real estate assets valued at over $12 billion.

Governance Concerns and Conflict of Interest

Central to the announcement is a pointed critique of the current governance framework at Elanor Funds Management Limited, the responsible entity for ECF. The Lederer Group highlights conflicts of interest arising from the overlap between the boards of Elanor Investment Group and the responsible entity, suggesting that key directors may not be acting independently or prioritising the interests of ECF unitholders.

Specifically, the Lederer Group calls out board members such as Ian Mackle, Su Kiat Lim, and Tony Fehon for their intertwined roles and potential conflicts. This governance issue is framed as a fundamental barrier to restoring investor confidence and unlocking value in the fund.

Proposed Management Overhaul

Beyond the takeover offer, the Lederer Group signals its intention to overhaul ECF’s management structure. Should the offer succeed, Lederer BldCo may seek to replace the current responsible entity with one that is fully independent and unconnected to Elanor or any unitholder. This move aims to eliminate conflicts and ensure decisions are made solely in the best interests of ECF investors.

Additionally, the Lederer Group proposes revising the investment management agreement to reduce fees, remove termination compensation rights, and align the manager’s interests with those of unitholders. The current management expense ratio is noted as one of the highest among listed REITs, with significant fees and cost recoveries paid to Elanor despite underwhelming performance.

Market and Regulatory Context

The offer comes amid a challenging backdrop for Elanor, including delayed financial reporting, potential regulatory scrutiny from ASIC, and strategic uncertainty as Elanor pursues a pan-Asian expansion. The Lederer Group’s bid offers immediate cash certainty to investors wishing to exit, at a price reflecting a premium to recent equity raises and trading levels.

However, the offer is subject to customary conditions, including no material adverse events or regulatory impediments, and there is no minimum acceptance threshold. This leaves open the possibility of a protracted contest or partial acceptance scenario.

Investor Implications

For ECF unitholders, the Lederer Group’s offer presents a clear exit option at a premium price, while also promising a governance reset and cost rationalisation if the takeover succeeds. The outcome will likely hinge on unitholder appetite for change and confidence in the Lederer Group’s stewardship versus the status quo under Elanor’s management.

As the offer period unfolds, investors will be watching closely for further disclosures, regulatory developments, and any counterproposals that may emerge.