AMP Capital hangs onto $7b office fundRising over Circular Quay, Quay Quarter Tower is one of the major assets in AMP Capital’s flagship office fund.

AMP Capital hangs onto $7b office fund

AMP Capital’s plan to spin off a private markets business, combining its real estate and infrastructure businesses, has been given a significant boost, with the investment platform winning an important battle to retain control of its flagship $7 billion office fund.

The trustee board of the AMP Capital Wholesale Office Fund on Monday announced it had endorsed an independent advisory committee’s recommendation against rival proposals for the flagship vehicle to move into the stable of either Mirvac or GPT, and instead remain managed by AMP Capital.

The recommendation comes after AMP Capital offered investors in the fund a number of concessions, most notably slashing its management fees in half in the short term. Fees will fall from a 50-basis-point levy on assets under management to 25 basis points temporarily, before subsequently rising to 35 basis points.

Against that cost though for AMP Capital and its parent, ASX-listed AMP, comes the greater certainty that the flagship fund, known as AWOF, which holds stakes in landmark office towers such as Quay Quarter in Sydney and Collins Place in Melbourne, will remain within the private markets platform ahead of the proposed demerger next year.

AMP shares rose 2.6 per cent, or 3¢, to $1.165 on Monday.

The wealth manager, now led by Alexis George, is putting also some of its own skin in the game – addressing another investor gripe – by committing total capital support for the real estate business ahead of demerger of up to $500 million.

The much-anticipated recommendation for the office fund’s future by the independent committee, comprising Ming Long and Bob McKinnon, was embraced by the fund’s trustee board, which comprises three AMP Capital executives.

“While each of the final three proposals had advantages, the PrivateMarketsCo proposal offered AWOF investors reduced fees, improved governance and a $271 million capital injection, while having by far the lowest risk to the composition of the AWOF portfolio,” a trustee board spokesman said.

The decision still needs to be ratified by the fund’s investors through a vote endorsing changes to the fund’s constitution expected in the first quarter next year. That vote will require 75 per cent support.

Although investors could reject the recommendation at the upcoming meeting, they would then need to form a viable consensus in favour of either the Mirvac and GPT proposals.

Monday’s announcement brings to an end, for now at least, a drawn-out process – it was steered by investment bankers Jarden Australia and independent advisory committee – to resolve the future of the high-profile fund. Wholesale investors in the fund, who include TCorp, Telstra Super, VFMC, and UniSuper, have won material benefits, including more alignment with their manager and reduced fees.

The process has had its controversial moments after the previous membership of the independent committee – chaired by experienced director Paul Say and including property veteran Barry Brakey and Wesfarmers director Sharon Warburton – resigned as a group.

The retention of the office fund comes as AMP Capital’s property business, led by Kylie O’Connor, regroups ahead of the proposed spin-off. Earlier this year it lost control of a $5 billion diversified property fund, whose investors opted to merge with a Dexus-run fund, while other mandates also exited. But the platform has since bounced back, last month striking the biggest direct retail property transaction yet in Australia.

“Our strong track record, as well as the recent $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,” AMP Capital chief executive Shawn Johnson 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.”

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