ANZO management fees under attack

Craig Stobo. Photo / Mark Mitchell

Institutional investors in the $1.2 billion NZX-listed AMP NZ Office Trust are trying to drive down management fee payments.

The investors are meeting the manager, owned by United Arab Emirates and Australian interests, over a revised fee structure proposal.

KordaMentha says the trust would become one of New Zealand's most expensive in base fees if a proposed deal put up by the UAE/Australian managers go ahead.

The trust now has "one of the most onerous fee structures in the listed property sector", KordaMentha says and although that would improve under the new deal, institutions are still complaining.

"ANZO's proposed base fee has some way to go to match sector leaders," KordaMentha said in an independent adviser's report on restructuring.

The trust's management is jointly owned by Abu Dhabi's Haumi and AMP Capital Investors.

Craig Stobo, chairman of the trust's manager, this week announced a new corporatisation proposal to be decided on in mid-October when investors meet in Auckland.

The trust has a commercial investment portfolio valued at more than $1.2 billion and its manager's fees are 0.65 per cent of gross assets, paid quarterly in arrears. The manager charges other fees if it engages third parties to assist with engineering, repairs and maintenance, leasing, sales and acquisitions, property development, property management, project management, building design and registry management.

Under the revamp, the manager would get 0.55 per cent of the value of investment property up to $1 billion and 0.45 per cent above $1 billion. KordaMentha issued a report on the proposal which said the revamp would better align manager and investor interests.

Once additional fees are taken into account, the trust's new fee structure would be similar to those of sector leader Goodman Property Trust, KordaMentha said. The trust was the only NZ listed property entity that did not win a performance fee, it said.

"ANZO is proposing to lower its base management fee and implement a performance fee based upon unit holder returns."

But the trust would have a far more expensive base fee than other vehicles if the deal goes ahead.

"ANZO's proposed base fee will be around 20 per cent higher than the base fee paid by Goodman Property Trust. The cost of managing incremental assets for ANZO under the management fee review is 0.45 per cent. This compares with an incremental cost of 0.40 per cent for Goodman Property Trust and 0.35 per cent for Property For Industry.

"However when additional fees are taken into account, ANZO's proposed management fees are likely to be similar to those of sector leader Goodman Property Trust," KordaMentha concluded.

ANZO's new base fees would be lower than all the other listed property entities, except Goodman and Property for Industry, it said.

One big investor said the focus of the debate should be whether under the changes, the investor/management interests were aligned.

"The key debate is whether the board and management teams - regardless of whether these are internal like DNZ Property Group or external like ANZO - are working in the best interest of equity investors.

If they are not, how easy is it for investors to change boards or management to get a better outcome?" he said.

* AMP NZ Office Trust investor meeting, 10am, Thursday October 21, Langham Hotel, Symonds St, Auckland.