AMP ‘opening door’ to Dexus Property Group

Dexus had been requesting due diligence on the AMP Capital Diversified Property Fund which could now be granted, say sources.

Australian listed financial group AMP is believed to be opening the door to Dexus Property Group to conduct due diligence on one of its $4 billion-plus property funds as early as this week for a potential acquisition.

It comes after Dexus in September wrote to the manager of the AMP Capital Diversified Property Fund with a proposal to merge the fund with an existing Dexus vehicle, the Dexus Wholesale Property Fund.

Dexus had been requesting due diligence on the fund and it is understood that following positive discussions, that will likely be granted as early as this week, say sources.

The ACDPF includes investments in buildings such as Sydney’s Quay Quarter office and retail complex at Circular Quay and the shopping malls Macquarie Centre in Sydney’s north and Pacific Fair on the Gold Coast and its properties are understood to be worth at least $4.5bn.

The proposal is understood to have been earlier encouraged and welcomed by many of the existing investors within the AMP Diversified Property Fund, many of which are the same that invest in the Dexus-controlled DWPF.

AMP Capital has $192bn of funds under management and market analysts say that the value of the funds’ rights depends on the length of its contracts to manage the real estate.

Dexus is working with Greenhill, while AMP Real Estate Funds Management is working with Evans and Partners Corporate Advisory and Herbert Smith Freehills.

The situation has posed a dilemma for AMP, which needs to act in the investors’ best interests but is also considering other plans for AMP Capital, namely a sale as part of a wider divestment of the whole company.

California-based private equity firm Ares Management has been in talks to buy the $5.9bn wealth manager AMP, in a move that could spark an auction or a break-up of the 171-year-old financial services company.

AMP confirmed last month it had received an indicative, non-binding, conditional proposal from Ares to acquire 100 per cent of the shares in AMP by way of scheme of arrangement, and it is understood that the bid valued the company at $6.4bn or $1.85 per share.

Access was given to the AMP data room.

Earlier, AMP had hired Credit Suisse and Goldman Sachs to assess options as part of a strategic review.

The review followed a decline in performance following the Hayne Royal Commission findings.

In July, AMP Capital’s head of real estate, Carmel Hourigan, left to head up office investments at Charter Hall.

Her departure, and that of other senior executives, followed the controversial decision by AMP to appoint Boe Pahari as head of AMP Capital despite a $500,000 fine for sexual harassment.

Dexus in the country’s largest office landlord with a portfolio worth $14.2bn and also industrial properties worth $2.2bn.

It also has a real estate funds management operation that counts $3.3bn worth of shopping centres among its investments, $9.1bn worth of offices, $400m of healthcare-related properties and $2.7bn of industrial buildings.

DataRoom reported in July that Dexus, along with other property managers, were believed to be in talks with the AMP Capital investors in a quest to take control of the funds within its $30bn real estate empire.

Invested in the fund is believed to be some of the country’s most powerful superannuation managers such as UniSuper and Sunsuper, which would need to be on board to switch their allegiances, and some say it can be a difficult task for investors to change managers due to contractual issues.