AMP to Retain Office Trust

AMP (ASX: AMP) shares edged higher yesterday after it confirmed that it is going to retain management of its $7 billion office fund after exploring options to sell.

AMP Capital says it will continue as the manager of the AMP Capital Wholesale Office Fund (AWOF) and implement several changes to boost performance including “governance of the fund, increased manager alignment and reduced fee arrangements”.

AMP shares rose 3% to $1.17 yesterday in the wake of the announcement, then fell back to be up just 1% before closing at $1.165, up 2.6%.

The management of the fund was put up for grabs after the AMP started the review of its structure (which look to sell and then finally reject the sale of AMP Capital itself).

Rival property managers and investors GPT and Mirvac were the leading contenders to take over the fund.

But that wasn’t to be and on Monday parent, AMP said the fund’s trustee board had decided it is in the best interests of unitholders that AMP Capital continue managing the fund.

AMP said the trustee board was advised by external legal and financial advisers and made a “thorough assessment” of proposals from two shortlisted competitors.

AMP says it will provide up to $500 million to support AWOF and other real estate funds ahead of the planned demerger of AMP Capital’s private markets business.

AMP Capital chief executive Shawn Johnson said AWOF was leading offices indices over one, two and three-year periods.

“Our strong track record, as well as the recent A$2.2 billion Pacific Fair and Macquarie Centre transaction – the largest of its type in Australian history – demonstrates our capability to continue delivering for our investors in real estate,” he said.

“This decision recognises the commitment of our real estate team, who deliver every day for AWOF unitholders, and follows a comprehensive and detailed review against our peers.”

The Office Fund provides exposure to a portfolio of office spaces across major Australian cities, including Sydney’s Quay Quarter and Angel Place and Collins Place in Melbourne’s CBD, and is widely regarded as one of AMP’s most lucrative assets.

Last April saw AMP Capital suffered a blow after being muscled out of managing its diversified property fund by rival manager and investor Dexus, which cast further doubt over the company’s future in property management.

To retain AWOF, AMP Capital has committed to improve governance controls, reduce fees and invest that $500 million to support its broader real estate portfolio.


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →