AMP Capital funds up in the air as Ares plots takeover play

AMP’s venerable real estate empires is under siege, which could hit a move on the private markets business.

Brisbane’s Indooroopilly shopping centre, in which AMP holds a major stake.

The AMP Capital property platform is coming under renewed pressure, with funds controlling about $12bn under threat even as US suitor Ares Management looks to forge ahead with a cash offer for all of AMP’s $59bn private markets unit.

Ares’ interest in the division, that primarily houses infrastructure funds, has come at a time when the real estate funds unit, that manages about $29bn, faces the loss of its diversified vehicle and uncertainty about its office fund.

Rival manager Dexus appears likely to succeed in its play for the $5bn AMP Capital Diversified Property Fund, which would see it merge with a $10bn fund it runs.

A crucial vote is due next Tuesday and comes as a process kicks off to determine the future of its well-regarded sister trust, the $7bn AMP Capital Wholesale Office Fund.

That fund has set up an advisory committee comprising three top real estate figures — former Future Future property head Barry Brakey, Wesfarmers director Sharon Warburton and property veteran Paul Say — to advise with investment bank Jarden running the process.

The process would likely draw bids from local heavyweights including Charter Hall, Investa, and GPT, all of which run well regarded wholesale office funds that could be combined with the AMP Capital-run vehicle.

It is also likely to bring out big names from offshore, some with the capacity to run core property funds and substantial capital to either grow the vehicle or take out investors who want to exit.

The $7bn portfolio is one of the largest ever assembled in Australia and a contest akin to Blackstone’s recent sale of a $3.8bn industrial property portfolio to Asian group ESR could play out.

Local managers and international funds management platforms could also team up with foreign capital as they did in the contest for the Investa platform.

The office fund is likely to be a more friendly process as it is one of the best performing vehicles in the sector and the superannuation funds invested in it are generally satisfied with the performance.

But losing the management of either fund would dent the earnings of the overall AMP Capital business and leave it overweight retail holdings.

Property investors are unhappy about the potential for AMP’s corporate woes and cultural issues to create instability for the real estate operation.

Long time-frames on major projects mean there are concerns about the group’s ability to attract sufficient capital while uncertainty remains about its ownership.

Investors in the group’s AMP Capital Diversified Property Fund are favouring a merger proposal with a $10bn unlisted wholesale fund run by rival group Dexus.

The AMP Capital-run vehicle has been hit with hefty redemptions, that peaked at about $2.6bn last month, although it has managed to peg these back to about $2bn in recent weeks.

The independent board committee of the $5bn fund, led by property veteran Ming Long and advised by E&P Corporate Advisory, last month recommended the merger with the Dexus fund.

But AMP responded with a radical plan under which it would sell off about $1.8bn in assets, mainly shopping centres, with stakes in major malls including Brisbane’s Indooroopilly, Perth’s Garden City Booragoon and Sydney’s Westfield Warringah Mall and the Macquarie Centre on the block.