KEY POINTS:
A $368 million deal to buy a half-share in three of Auckland's largest shopping centres announced on Christmas Eve will catapult one of AMP's biggest real estate funds to $2 billion once the transaction is completed.
On December 24, Stephen Costley, general manager of AMP Property Portfolio, said his firm's interests were buying Australia's listed Stockland out of joint venture ownership of the Botany Town Centre, Manukau Supa Centre and Lynnmall.
Stockland and AMP co-owned the centres which the deal showed were now worth about $730 million.
AMP's purchase of the remaining half-share is one of the biggest deals to be announced since Costley joined the business from Australia three years ago when the fund stood at just $540 million.
"It's been a busy three years for us with the opportunity to expand and diversify, but we have been supported by new investment into the fund which finished December 31, 2007 with around $1.7 billion of assets, of which $1.67 billion were property assets," Costley said.
The fund will hit $2 billion once the $368 million deal announced on Christmas Eve is completed. Costley said new investments in the fund were strong and an audited result of performance is due out this week.
"We've had investments from pension funds, staff superannuation funds and we have a feeder fund that's available to retail investors - AMP Capital New Zealand Property Fund," he said.
The deal to buy Stockland out of the three centres will not go through for some weeks. Settlement is scheduled to occur in partial tranches on March 31, April 30 and May 30. The acquisition is part of AMP's strategy to reweight the portfolio after taking over Capital Properties in 2006. The latest deal aims to move the diversified AMP Property Portfolio closer to its long-term sector benchmarks for retail and office properties.
AMP's deal to buy out Stockland is conditional on approval from the Overseas Investment Office.
John Schroder, Stockland Retail's chief executive officer, said his company had done well out of the sale.
Stockland bought its stake in 2003 and the sale represented a total blended yield of 5.9 per cent and had delivered a strong premium to book value, he said.
The company would look to reinvestment opportunities in Australia and Britain.
"Selling our stake in these centres ensures we can continue to focus on using our management, leasing and development expertise to add value to our Australian portfolio which has a book value approaching A$4 billion ($4.5 billion) and an A$1.8 billion development pipeline," Schroder said.
Stockland's shares were trading at more than A$9 last year but were down to A$7.31 yesterday.
AMP will now turn its attention to expanding its centres.
Proposals to intensify Botany were already planned before the Stockland sale was signed and the centre could soon have an extra 30 shops and 400 new carparks.
Costley said a one-level carparking building might be developed on the south side of the centre and a childcare facility might be moved.
Too few carparks were developed at Botany when it was opened and the additional parking plans are an attempt to redress the problem, worst at peak weekend trading when shoppers are forced to park off-site.
In the last year two new retailers had been introduced to Lynnmall, which had been refurbished and expanded to 30,200 sq m.
AMP was also examining the prospect of building at 61 Lambie Drive between Bunnings and State Highway 20 at Manukau, Costley said.
The AMP Property Portfolio has more than 50 commercial office, industrial, retail, hotel and development properties in Auckland, Hamilton, Wellington, Christchurch, Nelson and Tauranga. The total portfolio value at March 31 last year was $1.414 billion.
AMP'S MEGA CENTRES
* Botany Town Centre: 588 Chapel Rd, East Tamaki.
* Manukau Supa Centre: Cnr Lambie and Cavendish Drive.
* Lynnmall Shopping Centre: Great North Rd in New Lynn.
