AMP Office Trust to tweak its fees

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The country's biggest property trust, AMP Office Trust, has capitulated to investor demands for a new management fee which better aligns the interests of shareholders and management.

The Trust's management company is also halving the fee on a big, new and almost empty office block in central Auckland, for almost a year or till it is mostly leased.

Joint venture AMP Haumi Management has been heavily criticised for its running of the $1.39 billion listed property trust.

AMP Haumi Management chairman Craig Stobo told the annual meeting in Wellington yesterday that a new management fee structure was being considered. The company may move from the base-only fee which rewards the size of assets under management rather than the growth in the distributions per unit, to a lower base fee plus a performance fee.

A proposal would be put to unit holders by the half-year result.

The management company would also halve its fee for the struggling 21 Queen Street, to reflect the slow progress in leasing the new top quality office tower in central Auckland.

The fee would return to normal on September 30 next year, or when the building was 75 per cent leased, whichever occurred first.

Calls for unit holders to be able to elect an independent management board have been rejected in favour of a review of the current external management system to find improvements.

The trust has also reported a distribution profit of $16.08 million after tax for the three months to September 30, up 19.9 per cent on the same time last year.

Unit holders would be paid a gross distribution of 1.764 a unit on November 13 and the trust was on track to pay a full year gross distribution of 7.058c at the end of the 2010 financial year.

Rental revenue was up 6.8 percent to $35m due to rent reviews, new leases and lease renewals.

However, the portfolio occupancy rate fell to 90 percent from 97.2 percent at year end due to the addition of 21 Queen Street on completion last month. Revenue growth was not expected to match that of the past year.

Interest costs for the quarter were down $32.8 percent to $4.4m after bank debt was reduced using the proceeds from the $201.3m equity raising at the end of the financial year.

ING Investment manager Craig Tyson said investors had paid out over three times more than they had received in distributions in the past three years, including a hugely dilutive rights issue this year. The managers had also bought buildings at the top of the cycle while failing to sell others, and taking on the redevelopment of 21 Queen Street, which remains almost empty despite being completed last month.

Refinancing only 50 percent of debt in November had also been an unacceptable punt by the board that the credit crisis would not get worse, Mr Tyson said.Mr Stobo said the board had taken a conservative approach to preserve the trust's long-term value.

- © Fairfax NZ News