Future of AMP Capital Real Estate

16 October 2020

Expectations of a breakup of AMP Capital’s real estate platform continues to gather steam as the major real estate groups circle the waters of Circular Quay.

Reports this week in The Australian indicated that a host of parties have been undertaking due diligence after AMP’s investment banks, Goldman Sachs and Credit Suisse, invited groups to put a price on what they believed the assets were worth.

The process is of course designed to determine the worth of the “Management Rights” held by the Responsible Entities rather than just the assets themselves, as any purchaser would be seeking to retain the underlying beneficial (third party) investor capital.

The debate will then rage as to who really owns the value of the management rights, the investors – who can possibly seek to appoint their own alternative responsible entity, or AMP Capital whose developed the capability to do so.

The move is really a response to what has been a series of poor management decisions within AMP Capital which started with the axing of Adam Tindall in favour of Boe Pahari, who had been the subject of a sexual harassment compliant by a fellow staff member. (just google it)

The series of events which led up to and followed the decision to appoint Boe was a testament to the poor leadership within AMP and led to the erosion of shareholder value.

To reassure investors, the AMP Board appointed a new Chairman, Debra Hazelton whose first move was to consider whether AMP was being properly valued by investors by kicking off the “portfolio review” of its businesses.

The review will ultimately achieve a few things;

  • prove up the value of its business
  • provide a process for the rationalisation of part of its business, which may or may not involve a sale,
  • assess what and to where the business can redeploy capital, and
  • provide the leadership with an understanding of which parts of the business provide better shareholder returns on capital.

It is hoped that the review will be done by Christmas, however it will come at the cost of quality people who will elect to take up new opportunities in more certain environments.

As a former employee of AMP Capital, it is sad to see the impacts to investors, shareholders and staff, however it is certainly time for a new style of funds management. As a Fund Manager of an Opportunistic Fund, I chose to leave the business when an investment decision endorsed by an internal investment committee as being in the investors interest was overruled by the leaders of the business who were unable to allow AMP to bear the risks it presented to the brand. In other words the brand of the business was put ahead of the interest of the investors – hardly the right fit.

We need fund managers with personal integrity and a genuine desire to see investors achieve returns which exceed the risks taken with their capital; where self interest, whilst respected by investors and necessary to attract talent, comes second.

If you agree, let me know, we may need you in the future.