Jarden appointed as advisor on AMP Capital’s flagship $7bn office property fund

AMP’s company-transforming deal with Ares Management may come under pressure, with an advisor appointed to its flagship $7bn office property fund.

AMP chief executive Francesco De Ferrari. Picture: Britta Campion

A company transforming-move by AMP to sell a controlling stake in its marquee capital division to US group Ares Management could come under pressure, as investment bank Jarden has been tapped to advise on the future of its flagship $7bn office property fund.

The wholesale trust is viewed as the jewel in the crown of the real estate division as it has stakes in some of the country’s best known skyscrapers. But it is already in the sights of top property fund companies including Charter Hall and Dexus, which is already well advanced on a separate play for another $4bn AMP property fund.

The Australian can reveal that an advisory committee comprising three top real estate and corporate figures — former Future Future property head Barry Brakey, Wesfarmers director Sharon Warburton and property veteran Paul Say — has been set up to advise on options for the AMP Capital Wholesale Office Fund.

The move is partially driven by investors, understood to include top superannuation funds UniSuper, LGIAsuper and Commonwealth Superannuation Corporation, to ensure their holdings are protected under the proposed Ares tie-up and alternative options are explored.

The property fund has set up the advisory committee, partly as it does not have a structure including independent directors, as used by its diversified and shopping centre funds, with sources citing governance as one issue to be addressed.

Jarden will provide advice on the fund’s options, which could range from cutting a fresh deal with AMP Capital to leaving its stable by taking on a new manager or even a takeover.

Losing control of the wholesale vehicle could dent the ambitions of AMP chief Francesco De Ferrari to turbocharge the overall funds management unit’s growth via forming a $2.25bn venture with Ares.

The office fund is one of the stars of the $28.6bn real estate unit and it has held up even during the coronavirus crisis, as it mainly owns high-quality CBD towers in Sydney and Melbourne.

The portfolio includes redevelopment of the existing 50 Bridge Street property in Sydney, as well as Quay Quarter Tower and the wider Quay Quarter Sydney precinct, incorporating the neighbouring Loftus and Young Street mixed use development.

Other landmark properties are 200 George Street, Sydney and Melbourne’s Collins Place and 700 Bourke Street.

The property division is under pressure as the group’s AMP Capital Shopping Centre Fund has plunged alongside its mall-owning rivals, and Dexus is close to agreeing terms of a takeover of the AMP Capital Diversified Property Fund, making the manager keen to hold on to the office vehicle.

AMP’s proposed partnership with the US group unveiled on Friday includes the most valuable parts of AMP Capital: its private markets businesses, which also span infrastructure equity and debt and other minority investments.

Industry players said that both AMP and fund investors would have been sounded about the future of the fund by the top echelon of property houses.

Aside from Charter Hall and Dexus other interested players may include Investa, Lendlease, Mirvac, Centuria Capital and international managers.

The Ares joint venture has been tipped to radically and further change the shape of AMP’s business mix, after it also completed the $3bn sale of its life insurance arm last year.

The indicative terms outlined by 172-year old AMP on Friday would see Ares acquire 60 per cent of the $2.25bn joint venture and take management control. AMP would own the remaining 40 per cent.

Ares would buy the controlling interest in the private markets unit for $1.35bn, after last month abandoning its $6bn-plus whole of company takeover of AMP but keeping negotiations alive on the capital division.

The newly proposed deal ascribes an implied value to AMP Capital’s private markets business of up to $3.15bn, given AMP is retaining about $900m of assets, across mostly seed, sponsor and related investments.

AMP and Ares have agreed to work toward a binding deal over a 30-day exclusivity period but the move on the office fund points to the difficulty of keeping the platform intact.

The advisory board is one of the best credentialed assembled and investors in other AMP funds could seek to ensure their interests are also represented in a similar fashion.

Mr Brakey, now managing partner at Vienna-based CC Real, was head of property at the Future Fund for a decade and before that ran his own property advisory business.

Mr Say sits on the ALE Property Group board and was chief investment officer at Dexus Property Group from 2007 to 2012. He also held roles at Lendlease and is a director of Frasers Logistic & Industrial Trust. He was previously a director of GPT Metro Office Fund.

Ms Warburton is a director of Gold Road Resources and Worley. She was previously a director of Western Power and NEXTDC, chairman of the Northern Australian Infrastructure Facility, and as a director and co-deputy chairman of Fortescue Metals Group.

As at December 31, Ares had $US197bn in assets under management, inclusive of $US18.3bn in infrastructure and real estate.

AMP Capital managed $190bn in assets as at December 31, with about $59bn sitting within private markets. The broader capital division has faced some headwinds, though, and in 2020 experienced lower earnings and a 7 per cent decline in assets under management.

AMP last year endured a number of scandals, including revelations of a prior financial penalty imposed on then AMP Capital boss Boe Pahari for sexual harassment. He has since been demoted, but outrage over the conduct and the exit of AMP Australia boss Alex Wade over his behaviour, led to the departure of former chairman David Murray.