Daily ShareChat: AMP Office Trust

By Jenny Ruth

Wednesday 6th October 2010

AMP Office Trust's proposed governance changes should better align the interests of the manager with those of unitholders, says Craigs Investment Partners.

Unitholders will vote on October 21 on changing the management fee structure and turning the trust into a company with a majority of independent directors, although management would still be external.

"This review of management fees is designed to align interests of unitholders with those of the manager by lowering the base fee which addresses the conflict of interest whereby the manager is currently incentivised to drive management fees via asset purchases whether they be value accretive or not," Craigs says.

AMP's manager is currently paid a flat fee of 0.65% of trust assets. The proposal would lower this to 0.55% for the first $1billion of assets and to 0.45% thereafter. It would also receive 10% of any out-performance over other NZX listed property vehicles.

"While this management fee review is certainly a step in the right director for APT, in our view there are still potential areas of debate," Craigs says. These include whether the base fee should be lower and whether management should be internalised.

Craigs compares the proposal with how other listed property vehicles are managed including Goodman Property Trust whose manager is paid 0.5% of the first $500 million of assets and 0.4% thereafter.

Recommendation: Hold.

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