Dexus Property Group and Charter Hall ‘circling’ AMP real estate platform

Other property groups that could line up for the real estate funds management operation include parties such as Stockland or Mirvac Group. Picture: NCA NewsWire / Steven Saphore

The $4.6bn Australian wealth manager AMP is understood to have turned its attention to the sale of its entire real estate platform, with the expectation that Dexus Property Group and Charter Hall will wind up fighting for control of its assets.

It comes with speculation mounting that Charter Hall is weighing a bid for all of AMP’s real estate funds.

Despite suggestions in the market it has already made an approach about an acquisition of the platform, sources close to Charter Hall said this was not understood to be the case.

Dexus Property Group this month put forward an offer to merge the Dexus Wholesale Property Fund with the AMP Capital Diversified Property Fund.

Some question whether the Dexus and Charter Hall join forces to gain control of the real estate operations.

AMP has Goldman Sachs and Credit Suisse assessing options for the overall company, which could include a break up, and sources say that now they are leaning towards a potential sale of the entire real estate funds management business that sits within AMP Capital in one line.

A break up of the real estate platform could erode its value, according to experts.

While Goldman Sachs and Credit Suisse have been assessing broader options, E+P corporate advisory is working to evaluate the Dexus proposal for AMP, while Greenhill is working with Dexus.

Charter Hall has worked before with investment bank JPMorgan and UBS under leadership of outgoing real estate head Tim Church, who is joining Morgan Stanley.

The property fund manager has been one of the most acquisitive real estate groups listed on the Australian Securities Exchange and earlier poached AMP’s global real estate head, the well regarded Carmel Hourigan, to run its own office properties division.

There has been talk in the market that Charter Hall’s boss, David Harrison, has also been trying to convince AMP’s real estate investors to switch allegiances to his funds management operation.

Securing AMP’s real estate funds management rights would be pointless unless investors were willing to jump ship to Charter Hall.

However, AMP currently manages a highly attractive portfolio of assets and gaining those would help win the AMP investor support.

Among them are 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.

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

The sweeping review of AMP’s operations that could lead to a carve up of the business comes after a period of controversy for the company that includes the decision by AMP to appoint Boe Pahari as head of AMP Capital despite a $500,000 fine for sexual harassment.

Other senior executives have also left AMP Capital in a shake-up at the financial giant that came after it was trying to shake off the negative connotations from the royal commission into banking where it was exposed for charging fees for no service.

When it comes to an AMP break-up, most consider that the AMP Capital division is the easiest to divest.

Many view the bank and wealth management operations as difficult to separate given that much of the deposits in the bank come from the wealth manager, and a global private equity firm is unable to own more than 20 per cent of a bank.

Macquarie Group and Kohlberg Kravis Roberts assessed an acquisition of the operations, but have since walked away.

Other property groups that could line up for the real estate funds management operation include parties such as Stockland or Mirvac Group, although they are not currently believed to be contenders.