ACC makes rare stand against AMP Haumi Management

The blue bloods of the investment world are fighting over the future of AMP NZ Office Trust (Anzo), the largest listed investor in commercial office property in New Zealand.

The Accident Compensation Corporation (ACC) is calling time on AMP Haumi Management Ltd, a joint venture between AMP Capital Investors and the Abu Dhabi Investment Authority, which manages Anzo.

AMP Capital Investors is New Zealand's largest private fund manager managing over $11 billion in equity, property, fixed interest and private equity assets. ADIA invests oil wealth from of the United Arab Emirates and is among the world's biggest institutional investors.

ACC, an 8.% shareholder in Anzo,will vote against all resolutions at a meeting of unitholders today and is separately calling for a meeting to recommend the trustee remove AMP Haumi as manager. A manager may be removed from office, under the Unit Trusts Act 1960, if the trustee certifies that removal is in the best interests of unitholders.

Unitholders are being asked to approve the conversion of the unit trust into a company, which will be externally managed. Anzo announced a proposed new reduced management fee structure yesterday ahead of the meeting.

But, explaining the stand, ACC investment manager Nicholas Bagnall said unitholders were being asked to vote on a corporatisation proposal that would effectively lock in AMP Haumi as manager of Anzo.

"ACC believes that it is vitally important that unitholders retain their ability to remove the manager for poor performance. For this reason, ACC intends to vote against all the resolutions at tomorrow's meeting".

AMP Haumi had not only performed poorly but had also imposed unreasonable fees on unitholders, he said.

"ACC considers the investment decisions and capital management decisions made have unquestionably resulted in a loss of value. If Anzo had simply continued to own the buildings it owned 10 years ago, and not bought any other buildings or issued any further capital, Anzo would still have minimal debt, and would have a net asset value of $1.15 per unit.

"By contrast, the acquisitions and capital management decisions made by Haumi have resulted in today's net asset backing of just $1 per unit."

The figures are before provisions and deferred taxation.

"Despite this loss of value, in each of the last two financial years the manager has imposed a fee burden on unitholders that is $8.8 million greater than it has cost to manage the property portfolio. ACC does not believe that the proposed changes to the fee structure will result in a significant reduction in the level of fees paid to the manager."

In a statement released yesterday, Anzo chairman Craig Stobo said that following discussion with institutional investors, the manager had agreed in principle to a reduction in its management fee entitlement, should the conversion of Anzo to a company go ahead.

Despite that, the resolutions to be considered at today's meeting would remain unchanged.

If the proposals were approved, Anzo's management fee -- now 0.65 percent of assets -- would be replaced by a tiered base asset management fee of 0.55 percent of the value of investment properties up to $1 billion and 0.45 percent above this point, plus a performance fee based on relative outperformance over other NZX-listed property vehicles.

Mr Stobo said that under the planned amendment a third tier would be introduced into the base asset management fee for the corporatised Anzo, introducing another tier of 0.35 percent for the value of investment properties above $1.5b.

The planned amendment would not affect the performance fee component of the manager's fee entitlement or the manager's entitlements to fees for additional services.

Once the detailed wording of the amendment had been finalised, it would need either approval by ordinary resolution of Anzo investors at a further meeting, or a waiver or ruling from NZX that no such approval was needed.

An independent adviser's report from KordaMentha earlier said the proposed changes were positive for investors, but did not address the issue that an increasing number of investors saw as fundamental with the local listed property entity (LPE) sector, that of external management.

Many investors believed that internalising the management of the LPEs would unlock value for investors that was currently accruing to the external managers, KordaMentha said.