Welcome to this week’s Property News.
AMP Capital are the talk of town this week with increasing speculation of significant changes about to come.
As the redemption requests for the $4 billion AMP Capital Diversified Property Fund (ADPF) and the $7 billion AMP Capital Wholesale Office Fund (AWOF) continue to pile up (circa $2.7bn), the market is naturally treating AMP Capital like vultures swooping in on the kill, except this animal isn’t dead ….yet.
The business has lost a few limbs with the $1.5bn Sunsuper transferred to Mirvac and the $1bn Swiss RE portfolio heading for the auction room.
A unitholder vote on the future of the $4bn ADPF Fund is expected within weeks with investors likely to be considering remaining with AMP Capital or merging with the $10 billion Dexus Wholesale Property Fund. Dexus have been extolling their virtues with announcements this week of improved leasing deals in their wholesale fund assets in Brisbane in attempts to keep the conversation positive.
The AWOF fund has approached its transformation by appointing an independent advisory committee, with Barry Brakey and an independent financial adviser, Jarden Australia, to review the portfolio. In a bid to fund redemptions and starve off client criticism, the Board has identified a list of assets to sell.
AMP Capital have at least three assets on the market; 140 St Georges Terrace Perth (ADPF), 68 Waterloo Rd Macquarie Park (ADPF + Other) and this week a 50% interest in the $1bill 225 George Street Sydney (AWOF) will hit the market.
Investment Managers have begun trawling through the AMP Capital portfolio to see pockets of opportunity that may be of interest.
The recently refurbished 309 & 321 Kent Street Sydney may be one such asset. Jointly owned by ADPF and Dexus (in fact the only asset jointly owned by AMP Capital and Dexus), the 47,600sqm property is well positioned in the western corridor with good access to transport, Barangaroo and Wynyard. The property is fully leased to Property NSW, Genea and Cisco Systems with a 4.2 yr WALE. Dexus hold their 50% interest for $394m on a cap rate of 4.9%.
Dexus are likely to hold pre-emptive rights over the AMP interest, however the attraction of offshore capital to a Sydney asset with further upside would be of interest and would allow AMP Capital to leverage the position to benefit its unitholders. Dexus would need to consider this carefully, paying too much for the asset could be seen by AMP’s clients as foolish (especially whilst offering to manage the whole portfolio), but allowing it to be sold at a price other than their valuation would also be problematic.
An Ares led AMP Capital could in fact by transformational for the AMP Capital property business, and could bring a focus to the business which has been hampered in recent years from a lack of capital to grow and from the distractions in the wealth and infrastructure business.
Could be an interesting few months ahead.
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