AMP trust managers take battering

Intense questioning left chairman Craig Stobo rattled. Photo / Paul Estcourt

Heavyweight institutions and unit holder representatives battled managers of $1.2 billion landlord AMP NZ Office Trust yesterday.

They criticised the Australian/Abu Dhabi management's embedded position but eventually voted for the business to become a company with a new, lower fee structure.

Accident Compensation Corporation's Ian Purdy, ING's Craig Tyson, NZ Superannuation Fund's Anne-Maree O'Connor, BT Funds Management's Matthew Goodson, Shareholders Association chairman John Hawkins and others spoke out strongly at the meeting.

Although many support changes such as lower fees, ditching the unit trust structure and appointing more independent directors on a new board, most objected to their inability to dismiss the manager for financial under-performance.

Purdy's intense questioning left chairman Craig Stobo rattled, with Bell Gully lawyer Mark Freeman stepping in to provide a legal description of the grounds for the lucrative management contract's termination.

Purdy complained that ACC was not consulted on the new lower fee structure and demanded to know the value of that contract, owned jointly by Abu Dhabi's Haumi with AMP Capital Investors, but Stobo refused to confirm whether it was worth $100 million-plus or whether the performance of the business had been reasonable.

Silent at the meeting was Haumi's Mohammed Al-Qubaisi, a director of the management business.

Stobo said unit holders would decide on performance.

ACC, which vowed to vote against the changes, holds 8.9 per cent of the NZX-listed business, ING 6 per cent and BT about 2 per cent.

Tyson emphasised ING's intense dissatisfaction with the trust's performance, its massive capital-raising and poor corporate governance.

But after 16 months of negotiating, he was happier with the proposals which ING supported, particularly the last-minute decision announced this week to lower the fee for assets under management worth more than $1.5 billion.

O'Connor questioned the nature of the new structure, saying it "fell between two stones" and demanded to know whether the manager's lack of performance could be a basis for dismissal.

Stobo issued reassurances about consultation between the manager and the new board which would have four independent directors: himself, Graeme Horsley, Graeme Wong and Don Huse.

Goodson said internalisation was no silver bullet and cited problems in Australia but said he was encouraged by most of the proposals.

"Hopefully we won't see growth for the sake of growth, which has been one of the problems with APT."

Hawkins, who personally owns 29,000 units in the trust, objected to the last-minute fee revision, complained retail unit holders were not heard and said the trust's documentation was excessively complicated.

"The Shareholders Association favours companies and internal management and we would normally support corporatisation, but the cost is too high. Entrenching of the management contract would be exceptionally difficult to overturn. It would go on for months, years, in the court because the manager would defend its position to the death. We are giving away the ability to dismiss the manager in the future.

"The whole thing smacks of the manager very much looking after its own position and the trustee going along with that," Hawkins complained.

Buffy Gill of Goldman Sachs asked why the manager would charge extra for additional services, whether these charges were at market rates and, if unit holders rejected the proposals, would the trust return to the status quo.

Stobo said the charges were verified by two independent brokers.

Scott Pritchard, chief executive of the trust's manager, announced leasing of two floors in Auckland's refurbished office tower 21 Queen St. Insurance business Willis NZ and a Government tenant had taken one floor each.

After the meeting, Stobo said the changes would give investors greater transparency, control and accountability. The manager would have a stronger incentive to consistently act in investors' best interests.

Investors agreed on:
* New tiered management fee structure.
* Conversion from trust to company.
* Units to be converted into shares.
* Company trades from November 1.
* Externally managed under new deal.
* Formation of new board of directors.
* Most of those directors to be independent.