Dexus has announced that along with the Responsible Entity of Dexus Wholesale Property Fund (DWPF), it has entered into an Implementation Agreement (IA) with the Independent Board Committee of AMP Capital Diversified Property Fund (ADPF) on behalf of the Responsible Entity of ADPF (ADPF RE).

ADPF is currently a circa $5 billion high-quality diversified property fund that invests in the office, retail and industrial sectors. The portfolio includes investments in assets such as Quay Quarter Tower, Sydney (50% interest) which is currently under construction, 309-321 Kent Street, Sydney (50% interest, with remaining 50% co-owned by Dexus), Westfield Booragoon, Perth (50% interest) and Westfield Warringah Mall, Brookvale, Sydney (25% interest) along with a diversified portfolio of industrial assets. ADPF also comprises minority investments in two other AMP Capital managed wholesale property funds. 

The IA is an outcome of discussions with the ADPF RE and engagement with ADPF unit-holders over a six-month period. Under the IA, DWPF will seek to combine with ADPF via a stapling transaction or merger. The IA includes provisions customary for a transaction of this nature, including exclusivity arrangements.

If the merger is approved and successfully implemented, the merged entity will provide existing DWPF and ADPF unit-holders with an enhanced investment proposition.

“ADPF is a strategic fit with DWPF’s existing portfolio, providing additional exposure to premium assets,” said Michael Sheffield, DWPF Fund Manager. “The ability to merge this portfolio in a cost and capital efficient manner enables us to create a combined entity that delivers strong benefits to investors.”

“We pride ourselves on our approach to corporate governance and have a track record of delivering outperformance and supporting the investment strategies of our capital partners,” said Deborah Coakley, Executive General Manager, Funds Management. “We look forward to adding further value to the merged portfolio and welcoming new investors to our platform.”

Westfield Booragoon, Perth

Darren Steinberg, Dexus CEO said: “We are pleased to be able to make progress that will enable this merger to be voted on by both sets of unit-holders. This merger delivers further economies of scale from a management, procurement and leasing perspective across the platform, and is strongly aligned with our objective of being the wholesale partner of choice.”

If the merger is approved, it will expand and diversify Dexus’s funds management business. In addition, it will diversify DWPF’s existing wholesale institutional investor base through the introduction of new investors, while expanding existing relationships already established within Dexus’s funds management platform.

However, AMP Capital has put forward an alternative proposal to the merger, which it believes will deliver value to unit-holders. The proposal is supported by AMP Limited, which has kept Ares Management Corporation informed. AMP and Ares are currently in discussions regarding a joint venture for AMP Capital’s private markets businesses, including Real Estate.

The final decision on the merger proposal is subject to a vote by ADPF unitholders, which is expected to be held in the coming weeks, as well as approval from DWPF unitholders.

Kylie O’Connor, AMP Capital’s Head of Real Estate commented: “While we respect the IBC’s decision, we have strong conviction and confidence in our team and its knowledge of the ADPF portfolio. The performance of ADPF speaks for itself and we are confident that our proposal will deliver benefits to all ADPF unitholders. We will continue to engage directly with unitholders on the benefits of our proposal and the high-quality nature of the portfolio.

“AMP Capital has a proud history of managing ADPF since its first iteration in 1971 – a core portfolio of high-quality assets across the retail, office and logistics sectors, focused on achieving strong risk adjusted returns through active portfolio construction and asset management,” said O’Connor.

“Our focus has always been on performance for unit-holders, as well as managing the assets sustainably, and creating premium spaces for our tenants. Our track record in managing shopping centres and office locations is a strong testament to this.

“We are committed to continuing to work in the best interests of unit-holders and tenants in all outcomes,” she concluded.

Next steps
Dexus and DWPF have developed a transaction structure that addresses the needs of ADPF unit-holders while maintaining the strength and liquidity of DWPF. The proposed next steps include:

• Implementation of the merger will be subject to recommendations by each of the respective responsible entities in addition to both a DWPF unit-holder vote (50% threshold) and an ADPF unit-holder vote (75% threshold)
• ADPF and DWPF unit-holder meetings to vote on the merger are expected to take place in late April 2021.

Further details confirming Dexus’s contribution and expected returns to Dexus will be provided should the merger be approved by ADPF and DWPF unit-holders.