Advisory board’s sudden exit rocks AMP Capital search

The drawn-out process to find a new manager for a $7bn office fund run by AMP Capital has been rocked by the resignation of three independent advisers.

AMP is fighting to keep its property empire together. Picture: NCA NewsWire/Steven Saphore

The drawn-out process to find a new manager for a $7bn office fund run by AMP Capital has been rocked by the resignation of three high-profile independent advisers, including former Future Fund property head Barry Brakey, as the company fights to keep its property empire together.

The advisory committee, comprising Mr Brakey, Wesfarmers director Sharon Warburton and property veteran Paul Say, was tapped by the fund’s trustee to advise on options earlier this year, with investment bank Jarden running the process.

The trustee has just selected rival managers Mirvac and GPT as the final two potential external parties to take on the vehicle, which owns stakes in some of the country’s best office towers, including Quay Quarter at Sydney’s Circular Quay.

AMP Capital also remains in the ring to hold on to the fund but the superannuation fund investors that back the vehicle are believed to have demanded substantial changes to the way it is run amid a staff exodus from the real estate division.

Losing the fund could hit plans to spin off AMP Capital as a $200bn funds management business, as its once $30bn real estate division risks being further carved up after losing a $5.4bn property trust to Dexus earlier this year.

The fierce battle for the fund saw six external managers initially shortlisted, including heavyweights Charter Hall, Dexus, Stockland and QIC Real Estate.

News of the race narrowing was overshadowed by the surprise resignation of the entire independent advisory board just as the process comes to a head.

The AMP trustee board has since drafted in two other independent directors – corporate veterans Ming Long and Bob McKinnon – both of whom hold non-executive roles elsewhere in the AMP empire.

Quay Quarter tower at Sydney’s Circular Quay.

Ms Long, a former Investa Office Fund head, chairs AMP Capital Funds Management Limited, and Mr McKinnon, who was at Westpac and the Commonwealth Bank, is also a non-executive on this board.

The exits are understood to relate to the trio’s desire to take a different approach to the process being used to select a new manager, with a final outcome now expected by mid-October.

“The members of the IAC had a different view about how the process should be conducted as we move to its final stage,” an AMP Trustee Board spokesman said.

However, he did not provide details.

“We’re not going to speak on behalf of the IAC members. We respect their decision and we thank them for their advice throughout this process,” he said.

GPT has proposed merging the AMP fund with its own wholesale office fund and Mirvac would run the AMP fund as a substantial bolt-on to existing office funds operation.

AMP, meanwhile, desperately needs to keep the well-performed office fund under its wing in order to get away its planned spin-off of AMP Capital, as its infrastructure funds are also under pressure.

The shortlisting also comes amid ructions at the investor level about the extended process and the role played by AMP trustees.

The pressure has lifted on the new independent committee to select the best manager that can deliver investors a pipeline of opportunities in coming years.

The option of the status quo of keeping the fund as is considered all but dead, and AMP would also seek to rejuvenate it if it kept the fund.

For GPT, merging the vehicle with its office fund could be a way of boosting both portfolios, giving them diversity as they deal with the blow the coronavirus crisis has dealt the office market.

GPT has been an office seller but still has some of the country’s best towers which it could offer up into the fund in future.

Mirvac has made its name in offices as a developer of a new stock and this could prove attractive to the AMP Capital fund’s investors.

The developer has already worked with AMP on projects including the South Everleigh complex in Sydney built for the Commonwealth Bank.

Mirvac also picked up a large Sunsuper mandate from AMP Capital earlier this year in a sign that it wants to grow further in funds management, and called out the area’s growth in its recent results.