AMP NZ Office manager still reaps big fee

Tuesday 28th September 2010

AMP NZ Office Trust, the listed property investor looking to restructure itself into a company, won chequered approval for its transformation from independent adviser KordaMentha, which flagged the manager’s fee as still too pricey.

KordaMentha’s report said the change was an improvement, which will reduce the incentive for the manager to drive increased fees through asset growth, but the “base fee remains significantly higher than the market leading fee models”.

The trust’s manager, AMP Haumi Management, will cut its base to 0.55% of the value of investment property up to $1 billion, and 0.45% above $1 billion, down from 0.65% of gross assets.

“Despite a significant reduction in the base fee structure, ANZO’s proposed base fee (as a percentage of total assets) will be around 20% higher than the base fee paid by Goodman Property Trust,” the report said.

Still, KordaMentha’s research suggests rival Goodman Property claws back “lower base fees by charging higher additional fees” than AMP Haumi.

The shares were unchanged at 77 cents, and have slipped 1.3% this year.

The report says the changes don’t address the management contract with an external party – something many in the listed property sector see as the fundamental problem.

“Many investors believe that internalising the management of the LPEs (listed property entities) would unlock value for investors that is currently accruing to the external managements,” the report said.

“While the proposed changes are a positive step for investors, they fall some way short of achieving the full alignment of incentives that would be achieved under an internally managed model.”

KordaMentha’s report said AMP Haumi’s shareholders, AMP Capital and Abu Dhabi Investment Authority didn’t want to consider internalising the management contract, which could likely be costly and result in the loss of key staff, though its balance sheet has “ample capacity” to consider buying out the contract.

New NZX-listing DNZ Property Fund bought out its controversial management contract with chief executive Paul Duffy and his offside Alastair Hassell for some $35 million before it could convince shareholders to agree to an initial public offering on the stock exchange.

Unit holders of AMP NZ Office are scheduled to vote on the changes on October 21 and if the plan is approved, they will have the right to elect independent directors.

Businesswire.co.nz

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