Dexus announced Tuesday that it had moved a step closer to merging AMP Capital’s Diversified Property Fund (ADPF) into its Dexus Wholesale Property Fund (DWPF). However, AMP Capital have issued a counter proposal which includes injecting A$800m into the fund in an attempt to keep hold of the business.
Following six months of discussions and a recommendation from ADPF’s Independent Board Committee (IBC), the two funds have entered an implementation agreement. The agreement seeks to combine the two funds via a stapling transaction.
ADPF currently holds a diversified property portfolio valued at c.A$5bn, while DWPF is roughly twice the size with A$10.1b under management. Both funds hold a diversified portfolio of high-quality assets in office, retail and industrial property located throughout Australia.
ADPF’s portfolio includes investments in assets such as Quay Quarter Tower, Sydney (50% interest) 309-321 Kent Street, Sydney (50% interest, with remaining 50% co-owned by Dexus), Westfield Booragoon, Perth (50% interest) and Westfield Warringah Mall, Sydney (25% interest) along with a diversified portfolio of industrial assets.
Michael Sheffield, DWPF Fund Manager commented on the synergies between the portfolios saying, “ADPF is a strategic fit with DWPF’s existing portfolio providing additional exposure to premium assets. The ability to merge this portfolio in a cost and capital efficient manner enables us to create a combined entity which delivers strong benefits to investors.”
The merger discussions were triggered by uncertainty over the future of AMP Capital who are currently in discussion with Ares Management Corporation regarding a joint venture for AMP’s private markets business which includes Real Estate. This uncertainty has led to redemptions from ADPF and the merger with DWPF is seen by ADPF’s Independent Board Committee (IBC) as a way to stem this outflow.
Eager to counter the proposed merger, AMP Capital have put forward an alternative proposal to the unitholders offering to pump A$800m into the fund. Kylie O’Connor, AMP Capital’s Head of Real Estate stated, “While we respect the IBC’s decision, we have strong conviction and confidence in our team and its knowledge of the ADPF portfolio. The performance of ADPF speaks for itself and we are confident that our proposal will deliver benefits to all ADPF unitholders. We will continue to engage directly with unitholders on the benefits of our proposal and the high-quality nature of the portfolio.”
ADPF and DWPF unitholders are expected to vote on the merger in late April 2021. Implementation of the merger will be subject more than 50% of DWPF unitholders and at least 75% of ADPF unitholders approving the deal.