AMP Capital speaks out about rumoured takeover

The local funds group has gone public after months of speculation about the future of the real estate business, including a potential sale of the management rights of the operation.

This option was shelved last year and AMP has instead unveiled a non-binding agreement to form a 60-40 joint venture with Ares, in which the US giant would take over the management of AMP Capital’s private markets businesses, spanning infrastructure equity and infrastructure debt and real estate.

The partnership has been pitched as a way of accelerating the growth of AMP Capital‘s private markets, while unlocking immediate value for AMP shareholders.

AMP Capital head of real estate Kylie O’Connor told The Australian that the group was committed to its investors across the platform.

“We work for a great platform; we’re one of the largest in the country, we’ve got $28bn worth of assets, we’ve got some incredible projects and assets that we manage on behalf of our investors and we’ve got a really very supportive investor base,” Ms O’Connor said.

The property boss said that despite the “noise” and COVID-19 hitting last year, the funds manager had delivered an outstanding performance.

Critics point to the focus Ares has on opportunistic real estate and uncertainty over AMP Capital’s grip on key mandates, including those for superannuation groups SunSuper and UniSuper, as well as offshore heavyweights.

But Ms O’Connor said Ares could bring a number of benefits to the platform, with little crossover as it does not have a local funds business.

“I think what Ares can bring to the real estate platform is stability,” she said. “It’s a global network with access to very strong fundraising capabilities and a network of new offshore capital.”

AMP Capital’s real estate business itself has made steps offshore but the main focus has been on local projects, including Sydney’s multi-billion dollar Quay Quarter precinct.

Ms O’Connor said her vision was to stabilise the platform and, once it passed through a transition phase as the Ares deal was finalised, to grow the business.

“That’s really what people want to have; they want to have the opportunity to work on new products and new developments and give investors that access to all of those things that we can deliver,” she said.

The property boss declined to comment on the future of the AMP Capital Diversified Property Fund, where an independent board committee, advised by E&P Corporate Advisory, is close to making a recommendation.

The $4bn vehicle is fielding a merger proposal from Dexus, which involves merging the AMP-run fund with its Dexus Wholesale Property Fund. But a proposal has also been put forward by AMP Capital to keep the vehicle.

The fund has been hit with redemptions but it did not comment on whether these were approaching $1bn.

The group’s $7bn AMP Capital Wholesale Office Fund could also come into play, although the group emphasised it had set up an advisory committee last September and appointed investment bank Jarden for advice.

Ms Connor said this had been done to ensure the fund’s governance structure was robust and had a level of independence, due to the interest in the platform.

While there are rumblings among investors in the AMP Capital-managed funds about seeking new managers, the tie-up with Ares could offer an international outlet that local managers may struggle to match.

However, almost all listed groups that have shown an interest in the AMP Capital platform have flagged that they want to grow in funds management, meaning pressure will remain on the property unit to perform.