One of Australia鈥檚 largest unlisted property funds, the Dexus Wholesale Diversified Property Fund (DWPF), has approached AMP Capital proposing a merger with the latter鈥檚 AMP Diversified Property Fund (ADPF) to create an entity with more than A$15bn (鈧�9.2bn) in managed funds.
A spokesperson for DWPF told 91传媒在线 today: 鈥淎n initial approach has recently been made by DWPF to the ADPF responsible entity to consider a merger.鈥�
DWPF is the flagship of the Dexus suite of unlisted funds. It has some 70 investors, including Australian super funds and a number of global investors. Its portfolio of office, retail and logistic properties is valued at A$10.7bn.
The Dexus fund is seeking access to due diligence to confirm the merits and financial metrics for both sets of fund investors before submitting a binding proposal.
Any subsequent action would need the support of investors from both funds.
鈥淒WPF is now awaiting the initial response from the ADPF Responsible Entity regarding access to due diligence so that DWPF can consider the formulation of a binding proposal,鈥� the DWPF spokesperson said.
鈥淚t is important to note that the approach was made fund to fund, that is by DWPF to ADPF,鈥� a source told 91传媒在线, adding that DWPF鈥檚 approach stemmed from approaches by ADPF investors dissatisfied with the ongoing underperformance of their fund.
ADPF is a diversified core fund with a portfolio of more than 20 assets, valued at some A$4.5bn.
The fund鈥檚 strategy, it says, is to focus on achieving 鈥渟trong adjusted returns through active portfolio construction and asset management, including acquisitions, and accretive developments鈥�.
One of the fund鈥檚 recent acquisitions, purchased jointly with AMP Shopping Centre Fund, was a half stake in Brisbane鈥檚 Indooroopilly Shopping Centre. The two funds paid A$800m to Commonwealth Superannuation Corporation for 50% of the asset.
Reports have suggested that it was this purchase 鈥� and the price paid for the asset when the shopping centre industry was already facing severe stress 鈥� that made some investors in ADPF unhappy.
An Institutional investor, who has investments with both Dexus and AMP Capital, told 91传媒在线: 鈥淎s an investor in DWPF we can see some merit in merging with ADPF. You understand the attractiveness to the Dexus fund to be able to bolt on a A$4-A$5bn fund.鈥�
The investor said the whole AMP business, which has some A$192bn in assets under management globally, was 鈥渁t risk鈥�.
鈥淎MP has said it is initiating a strategic review of its business, and this is tantamount to saying that the whole business is for sale,鈥� he said.
鈥淎s an investor, we are not going to sit around and wait for someone to launch a takeover of AMP and offer to buy the business. That would not be the best thing for investors. But if we get suitors like Dexus making an offer, we are more likely to get (better) value.鈥�
But he said the merger would face 鈥渟ome complications鈥�. Others have said it would likely be a long-drawn-out affair.
This investor, who is invested with the AMP Wholesale Office Fund. said he was satisfied with the performance and returns from that fund.
鈥淲e rate AMP Wholesale Office Fund highly, and, in fact, we support the real estate team at AMP Capital. But given what has been happening to the AMP group, I don鈥檛 think the status quo is sustainable,鈥� he said.
鈥淚t feels like a treadmill, and it has started moving. I don鈥檛 think anyone can stop it. My concern is that (the DWPF offer) may lead to contagion. This is the beginning of a process within the property fund management industry in Australia. It will not be an isolated instance.鈥�
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