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Sweeping changes to governance and management fees at AMP NZ Office Trust

Friday 26th February 2010

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AMP NZ Office Trust has bowed to shareholder pressure and will restructure by July 1 as a normal company with its own board and a new management fee structure to clearly separate the interests of the trust and its manager, AMP Haumi Management Ltd.

Shares of AMP NZ Office climbed 2.7% to 76 cents on the NZX today. The board will have a majority of independent directors, and be subject to the Companies Act, NZX Listing Rules and the Takeovers Act.  At present, Perpetual Trust governs the trust, while representatives of Haumi, AMP Capital Investors, and two independent directors making up the board of the trust's manager.

The changes reflect a marked change in market conditions in recent years, and are the outcome of a strategic review last year, the chairman of AMP Haumi, Craig Stobo, said in a statement to the NZX.

Disquiet over AMP Haumi's remuneration and the trust's governance came to a head last year over the construction of a new blue-chip office tower at 21 Queen St, Auckland, for which there were initially no tenants, and which required a $34.4 million write-down in the last financial year.

Write-downs across the trust's portfolio totaled $248 million in the year to June 2009, and declared a loss of $139 million, including revaluation impacts.

"The proposed changes ... represent a significant shift in position and commitment from the Manager's point of view," said Stobo.  "We believe they will meet or exceed investor and market expectations."

Stobo also announced in the same statement that the trust's chief executive Rob Lang would step down once the new structures were implemented, in July, having made "a tremendous contribution".  An international recruitment process will now occur.

"Not only do these changes strengthen ANZO's competitiveness as an investment proposition, they also represent ANZO's commitment to stepping up to the benchmarks identified by the Capital Markets Development Taskforce," said Stobo.

Under the proposed new arrangements, which require shareholder approval, a base fee pitched at 0.55% by value for the first $1 billion of investment properties is augmented with a fee of 0.45% for properties beyond the $1 billion first tier, indexed to the CPI inflation index.

No performance fee will be paid for negative results. Effective from July 1, a performance fee of 10% is proposed for outperformance against other NZX-listed property vehicles, capped at 5% above the performance hurdle.

Under the current Trust Deed, AMP Haumi can charge a maximum management fee of 0.65% of gross investment assets.

A "robust management contract" will specify the role, responsibility, and remuneration of the portfolio manager, and establish performance standards and delivery criteria.

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