AMP Capital will cut management fees and tip as much as $800 million from its parent, ASX-listed AMP, into a $5 billion property fund it manages in a bid to thwart a rival merger proposal from Dexus.
The investment management arm of AMP is battling the momentum gained by Dexus, which has already secured the backing of the independent board of the AMP Capital Diversified Fund for its plan to merge the vehicle with its own $10 billion wholesale fund.
AMP Capital is racing against the clock, with Dexus – which has an implementation agreement with the independent board – due to put its merger plan forward at a unitholder vote in late April.
The high-stakes battle for the AMP Capital-run fund, known as ADPF, comes amid broader ructions within AMP Capital’s $28 billion real estate business. Pressure is also being felt among its investment mandates and its $7 billion office fund.
As well, AMP is on a tight deadline to lock in a $1.35 billion deal that would hand New York-based Ares Management a 60 per cent stake in AMP Capital’s private markets business.
AMP Capital has already revised its proposal to retain ADPF several times, before putting it to the independent board. As the clock winds down, the fund manager has accelerated its efforts to retain control of the fund, issuing its proposal directly to the fund’s 30 or more wholesale investors.
The latest version includes a substantial cut to the 60-basis-point rate at which AMP Capital levies management fees on the fund. The proposal also involves AMP injecting at least $800 million into the fund. That would be achieved through the unusual move of acquiring stakes in some of the fund’s flagship malls and by establishing an equity position in the fund, for the first time.
The fresh equity would be a much-needed salve for the fund, which must address more than $2 billion in redemption requests. The fund holds stakes in a range of assets include the emerging Quay Quarter Tower in Sydney, Westfield malls in Perth and Sydney, and the Pacific Fair shopping centre on the Gold Coast.
Kylie O’Connor, AMP Capital’s head of real estate, said: “While we respect the [independent board committee’s] decision, we have strong conviction and confidence in our team and its knowledge of the ADPF portfolio.
“The performance of ADPF speaks for itself, and we are confident that our proposal will deliver benefits to all ADPF unitholders. We will continue to engage directly with unitholders on the benefits of our proposal and the high-quality nature of the portfolio.”
Meanwhile, on Tuesday, S&P Global Ratings said the proposed merger with ADPF would help bolster Dexus Wholesale Property Fund’s scale and diversity of complementary assets.
Keep up with Commercial Real Estate news.