Investor welcomes changes at AMP

AMP NZ Office Trust's annual meeting on Thursday flagged major changes for the country's largest listed office landlord.

But a cornerstone investor, ING NZ with 10.4 per cent, wants more changes to the business which owns $1.3 billion of real estate.

Investment manager Craig Tyson welcomed the trust's management fee moves.

"We would have preferred an internalisation of the management but announcement from chairman Craig Stobo that the board was considering changing the management fee structure to incorporate a lower base fee plus an incentive fee is a net positive. This will align the manager somewhat with unitholder returns and reduce the incentive for the manager to continue aggressively growing assets under management rather than maximising unitholder returns," Tyson said yesterday.

Rob Lang, chief executive of the trust's manager, said the management did not want to engage in a public dispute with Tyson. But he told the annual meeting that the trust was in good shape and had received positive feedback. He wanted the trust to bring in an incentive fee based on performance compared to its peers.

"We also think that the announcement that the manager will undertake a review of the appropriate corporate governance model is potentially even more important.

"For a while now we have argued that the boards of these externally managed vehicles should have a majority of independent directors. Philosophically, why should the minority investor [the manager] have a majority of directors on the board while investors, normally at least 80 per cent of the register, be only represented by a minority of directors? Property for Industry, Goodman Property Trust and Kermadec Property Fund all have a majority of independent directors, whereas the rest don't," Tyson said.

The manager's offer of a partial fee rebate for the almost totally vacant office block on 21 Queen St was "a positive but not far enough. We argued that the manager should forgo a management fee on the asset until it was earning a suitable return on cost of $106 million."

He also called for the trust to buy properties cheaply and sell when the market was good.

"We also expect that they will raise equity when it's cheap which usually means when the trusts are trading at a premium to their underlying assets, and we expect that they should be in a position to buy back their units if they are trading at a large discount to their underlying assets. This is how the manager adds value for unitholders, besides negotiating with tenants and maximising the rental growth without frightening off tenants. What we've seen in the last year has been more of the opposite ... We're not saying it's easy to get just right, but we expect the managers to have a view on the property cycle and manage their capital and assets through the cycle.

"There is no substitute for good management. And it's usually during tough times that managements, strategies and business models are tested. However, if the manager makes these changes then unitholders should get comfort that at least there is greater alignment and reduced potential for conflict of interest."

TRUST CHANGES

AMP NZ Office Trust will:
* Change its management fee.
* Align interests of manager with investors.
* Halve fee for managing 21 Queen St, Auckland.
* Report back on more moves in February.