Dexus closes in on AMP Capital

AMP Real Estate Funds Management, which manages ADPF, is being advised by Evans and Partners Corporate Advisory and Herbert Smith Freehills. Hollie Adams/The Australian

Dexus Property Group appears to be closing in on the $4bn-plus AMP Capital Diversified Property Fund, in what could have wider implications for the takeover plans by Ares Management of AMP.

DataRoom understands that the advisers for the real estate fund’s manager are currently seeking feedback from investors about the Dexus proposal, which involves merging the AMP Capital Diversified Property Fund (ADPF) with its Dexus Wholesale Property Fund, and another proposal put forward by AMP Capital.

Dexus put forward a formal proposal on December 21, while AMP Capital also put forward a proposal, outlining why the ADPF investors should retain AMP Capital as its manager.

It is understood that AMP Capital’s proposal involved an offer that would enable investors, which include powerful superannuation funds such as Sunsuper and UniSuper, to cash in some of their units in the fund, should they wish to do so.

ADPF owns indirect interests in other real estate funds managed by AMP Capital and the understanding is that AMP Capital’s proposal involves buying some of those interests.

The offer involves providing liquidity in the fund and reducing the number of investors from down to a handful of major players, enabling others to exit.

AMP Real Estate Funds Management, which manages ADPF, is being advised by Evans and Partners Corporate Advisory and Herbert Smith Freehills.

It is understood that it would make a decision on the two proposals next month.

Market experts believe that the Dexus offer is more compelling, with questions surrounding where the funding will come from for the offer mooted by AMP Capital.

This is at a time that the parent company remains subject to a takeover bid by Ares Management, which is believed to be motivated by the opportunity to gain control of the AMP Capital arm.

The understanding is that Ares, which counts former Credit Suisse Australia head John Knox as its chairman of Australia and New Zealand operations, needs to find a buyer for AMP’s bank and wealth management arm to make its transaction stack up.

However, logical buyers, such as Bank of Queensland and Bendigo Bank are believed to be only interested acquirers of the AMP bank at a substantial discount.

With AMP’s share price drifting lower, it appears investors are losing confidence that a bid will emerge from Ares, which approached the company with an indicative, non-binding, conditional proposal to buy AMP for $1.85 per share or $6.4bn in the second half of last year.

Access was given to the AMP data room and AMP has been working with Credit Suisse and Goldman Sachs to assess options as part of a strategic review.

The ADPF 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 Dexus 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 is considering a break up or sale of the company following a number of challenges, which include a decline in performance following the Hayne Royal Commission findings, the departure of AMP Capital’s head of real estate, Carmel Hourigan, who now heads up office investments at Charter Hall and controversy surrounding the head of AMP Capital, Boe Pahari, who was fined $500,000 for sexual harassment.

Dexus, advised by Greenhill, is 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.