Mirvac and Dexus in showdown over $7b AMP office fund
Under a new proposal, AMP will tip $800 million into the AMP Capital property fund to stave off a Dexus merger.

Mirvac and Dexus in showdown over $7b AMP office fund

Investors will decide on Mirvac’s bid to wrest control of AMP Capital’s $7 billion flagship office tower from its newly minted fund manager, Dexus, after a group of unitholders requested a vote to settle the issue.

Mirvac issued a statement about the vote to replace management on Friday evening.

The fund, the largest single asset in AMP Capital’s real estate business, holds stakes in some of the country’s best-known office landmarks such as the newly completed Quay Quarter in Sydney and Collins Place in Melbourne.

Its wholesale investors include TCorp, Telstra Super, VFMC and UniSuper.

The investors’ pre-emptive move to resolve the tussle at the ballot box effectively bypasses what would have been a more drawn-out process, through which an independent advisory committee had begun weighing up the merits of Mirvac’s proposal to run the AMP Capital Wholesale Office Fund (AWOF) against those of the incoming manager, Dexus.

The request for a vote fires the gun in the race to lock as much as investor support as possible by Mirvac and Dexus, after weeks of quiet lobbying by both camps.

In a dramatic coup, Dexus, led by Darren Steinberg, struck a deal to take control of AMP Capital’s entire $28 billion real estate and local infrastructure business last month. But Mirvac, headed by Susan Lloyd-Hurwitz, had never resigned its aspirations to become the manager of a part of that empire, the flagship office fund.

Board battles

Mirvac was previously the loser in a very similar process which extended through much of last year, when the independent committee assessed the merits of a number of rival proposals to manage the high-profile office fund against the value in remaining within the AMP Capital stable.

In November, the fund’s trustee board accepted a recommendation by the committee for the fund to stick with AMP Capital instead of shifting to either of the rival platforms of the two shortlisted final bidders, Mirvac and GPT Group.

That process was mired in controversy amid allegations about AMP’s conflicts of interest. Shortly before the process concluded, a high-powered independent committee chaired by Paul Say abruptly resigned and replaced by two other directors of AMP entities, Ming Long and Bob McKinnon. The AWOF board was itself comprised three AMP Capital executives.

Anger over that process erupted in February when investors fired a broadside at AMP. They raised concerns about how conflicts of interest were handled, along with the conduct and transparency of the process that led to AMP Capital retaining management rights for the office fund.

More upheaval was to come though as AMP progressively whittled back and finally abandoned altogether its plan to split off and spin out AMP Capital’s real estate and infrastructure investment management operations into a separate ASX listing.

Instead, AMP sold off management of the real estate and local infrastructure operations to Dexus last month. Its global infrastructure platform, both debt and equity, was carved up between two US investors.

The final shape of the deal Dexus struck is still being determined – it could be worth anywhere between $430 million and $1 billion – and will depend on how many of the funds and individual mandates on the AMP Capital platform, including the contested AWOF fund, remain with their new manager.

In a separate step last month, investors in AWOF cleared the way to change managers more easily, when they voted through a series of modifications to the fund’s constitution.

Among the measures, the threshold of support needed to replace the manager of AWOF was lowered from 75 per cent to 50 per cent, a point that was noted in Mirvac’s Friday night announcement.