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AMP Capital Investors NZ Ltd has waived its pre-emptive right to buy the units Australian takeover target Ronin Property Trust holds in the AMP NZ Office Trust.

The pre-emptive rights are among numerous pre-emptive clauses in a deed settled when AMP Capital & Ronin became 50% shareholders in AMP Ronin Management Ltd in January.

Multiplex Ltd is most of the way towards succeeding in its takeover offer for Ronin – it had 78.92% on Friday – and will be able to assume ownership of the units plus Ronin’s management role at the AMP office trust.

AMP Capital had previously owned the whole of the management company.

The deed required Ronin to hold no less than 19.9% of AMP NZ Office Trust for 2 years – to 15 January 2006 – and at least 15% after that. If it went below the thresholds it would have to offer the remaining units to AMP Capital.

Given that Multiplex began its bid by acquiring the 15.7% interest of AMP Life Ltd, the pre-emptive rights hardly seemed an issue. Last year it was a different story: AMP Life fought Centro Property Group’s bid for the AMP Shopping Centres Trust in Australia, disclosing after the bid began that it held various pre-emptive rights which it was unwilling to give up.

Centro eventually lost that bid, but got some shopping centres in the wash-up after Westfield Group bought the AMP trust.

Earlier stories:

5 November 2004: Multiplex goes unconditional on Ronin bid  

28 September 2004: NZ assets a major feature of Multiplex bid for Ronin

18 December 2003: Ronin to take most of National Provident’s AMP NZ Office stake, half of trust management

20 May 2003: AMP Life throws another spanner at Centro takeover bid

Multiplex Group’s takeover of Ronin Property Group is well on the way to completion.

Multiplex reported today that it had acceptances for 74.36% of Ronin’s stock.

It also said Standard & Poor’s intended to reclassify Multiplex securities for inclusion in the S&P/ASX 200 property index from tomorrow – Wednesday 17 November.

Multiplex Ltd picked up nearly 12% of Ronin Property Group on Thursday, taking its stake in the AMP property trust to 47.02%.

Multiplex started its bid by acquiring the 15.7% of Ronin still held by AMP Life Ltd and declared its offer unconditional a week ago.

Paladin Australia co-founder Rod Leaver formed Ronin Property Group at the beginning of 2003, and AMP – after losing 3 of its 4 property trusts in takeovers – entered a deal in August 2003 to internalise the AMP Office Trust (Australia)’s management at Ronin, keep AMP Life as a 21% unitholder and take $A29.7 million from Ronin as a procurement fee for the management.

Ronin became a significant player in the New Zealand property market in December 2003, when it agreed to buy the National Provident Fund’s stake in the AMP NZ Office Trust and to join a new management company for that trust with AMP Capital Investors (NZ) Ltd, which previously had 100% management control.

Multiplex, too, has become a significant player in New Zealand, first through its construction activities, more recently by forming a development division and through the launch of an unlisted $265 million New Zealand property fund whose main asset is the ASB Centre in Auckland, a $102.5 million acquisition which the AMP NZ Office Trust had elected not to pursue.

Earlier stories:

5 November 2004: Multiplex goes unconditional on Ronin bid

28 September 2004: NZ assets a major feature of Multiplex bid for Ronin

5 September 2004: Multiplex launches NZ unlisted fund

Multiplex Group declared its takeover bid for Ronin Property Group unconditional on Thursday, when it had 17.46% of Ronin stock.

Multiplex took possession of AMP Life Ltd’s 15.7% holding in Ronin before announcing details of its takeover proposal at the end of September.

The consideration is 0.274 of a Multiplex security plus A8c cash for every Ronin security.

Earlier stories:

28 September 2004: NZ assets a major feature of Multiplex bid for Ronin

25 September 2004: Multiplex talking Ronin takeover

A feature of Multiplex Group’s proposed takeover of Ronin Property Group (containing the former AMP Office Trust in Australia) is that it will take the combined portfolio of the 2 groups in New Zealand over the $A1 billion level.

Multiplex Group took possession of AMP Life Ltd’s 15.7% holding in Ronin Property Group before announcing details on Monday of its takeover proposal.

Multiplex has offered 0.274 new security for every one existing Ronin security, plus A8c cash, worth $A1.33 – a 9.9% premium to the price on 21 September, the day before speculation on Ronin’s future began, and a 17.7% premium to Ronin’s asset backing.

The combined group would have $A5.5 billion of assets, $A1.6 billion debt for 29% gearing. That raises Multiplex’s gearing by 3 points and reduces gearing on the Ronin portfolio from 34%.

Multiplex’s property portfolio would double to $A3.2 billion, comprising 30 assets & 3 investments, and its $A3.7 billion market capitalisation would make it Australia’s 4th largest listed property trust.

The family of Multiplex chairman John Roberts will be diluted from 38% to 27%, and the Hawaiian and Wylie Holdings stakes in multiplex will both fall below 5%.

Ronin holds 30% of the AMP NZ Office Trust plus half of its management company, acquisitions begun in December & completed in January. Multiplex, meanwhile, has just launched its own $A290 million New Zealand property fund.

Ronin asked for the Monday trading halt to be extended because it had received an approach from another party. The trading halt was lifted late on Monday.

But Multiplex isn’t waiting for the competition to gather strength. With 15.7% in its pocket, it said it would go unconditional on 50.1% acceptance.

Trading in Multiplex Group and Ronin Property Trust stock in Australia was halted late on Friday, expected to resume on Tuesday.

Mirvac Group denied it was talking takeover with Ronin on Thursday, while neither Multiplex nor Ronin has made any comment.

The Australian activity has a bearing on property ownership in New Zealand. Ronin bought the National Provident Fund’s 30% stake in the AMP NZ Office Trust last summer, plus 50% of the trust’s management company.

Multiplex, primarily a commercial builder, has had a growing New Zealand presence, setting up a development arm and recently a listed fund holding New Zealand assets.

Mirvac Group managing director Robert Hamilton said today Mirvac “is not currently involved in corporate activity regarding Ronin Property Group.”

He was responding to media speculation that Ronin (which contains Ronin Property Trust, the former AMP Office Trust in Australia) was a takeover target for either Mirvac or Multiplex Ltd.

Despite his denial, Mr Hamilton didn’t rule the idea out. He said Mirvac had a strategy to increase the scale of its property investment & management operations and continued to investigate opportunities.

Neither Multiplex nor Ronin has issued any statement on the speculation.

Ronin’s share price began to rise at the start of August, but has put on A7c to $A1.29 this week.

What happens to Ronin affects investment ownership in New Zealand. Ronin bought the National Provident Fund’s 30% stake in the AMP NZ Office Trust last summer, plus 50% of the trust’s management company.

Westfield still to play its hand

Centro Properties Group finished last week extending its offer to unitholders in the AMP Shopping Centre Trust in Australia to 19 May, and with the likelihood of its ability to take control of the whole of the AMP trust’s portfolio still up in the air.

The AMP trust got an appraisal on Tuesday from Deloitte Corporate Finance Pty Ltd which was slanted in its favour through an emphasis on some features of the bid and of the merged entity as disadvantages, and a conservative view of advantages.

In the end, the appraisal won’t make much difference because the fate of the trust lies with a competitor and a handful of institutions, not with small shareholders more likely to be swayed.

11 institutions hold 83%

The top 2 unitholders are Centro and Westfield Trust, each with 19.9%, and AMP entities between them hold 20.5%. The next 8 are bank nominee holders. Together they hold 83% of the shopping centre trust.

It’s possible for AMP interests to take different viewpoints. The troubled head company, AMP Ltd, has an opportunity to sell a large asset, though it would look more keenly at Westfield’s $A1.80 than at Centro’s conditional scrip & cash offer, which had climbed to a value of $A1.66/unit by Easter. AMP Life, holding the other half of some of the shopping centre trust’s assets, could find Centro an acceptable partner & asset manager, especially if AMP Ltd doesn’t like the idea of buying back $A1 billion of assets through default rights. But AMP Henderson Global Investors won’t want to lose its management contracts.

For the AMP interests and for other institutions there are different tax implications which are likely to have a strong bearing on the outcome, especially the impact of capital gains tax gains & losses.

Some institutions started positioning their holdings in the listed AMP trust in February. AMP Ltd, which held 24.62% but made a major loss on its British investments in 2002, sold down to 21.55% in February, just after the shopping centre trust had strengthened its holdings in the Pacific Fair mall on the Gold Coast (by 4% to 44%) and the Macquarie Centre in North Ryde, Sydney (by 5% to 55%).

The shopping centre trust increased those holdings by taking up a 10% stake in a new unlisted fund which bought 40% of Pacific Fair for $A230 million and 50% of Macquarie for $A239.5 million.

At the start of the year the AMP trust’s unit price was around $A1.35-1.40. The Westfield purchase from institutions took it to $A1.80.

Centro lodged a full takeover bid for the AMP trust on 20 March.

12 months of ownership is an important factor in capital gains tax considerations.

Pure-play versus diversified

Some institutions may accept the Deloittes argument on the shape of the existing trust, as an entity dedicated to ownership of regional shopping centres, versus the shape of a more diversified new entity run by Centro. They will also be weighing up the possibilities in a Westfield takeover bid, not yet made, which could be for the whole of the AMP trust’s portfolio, perhaps including AMP Life’s interests, or for those parts not held by AMP Life, keeping AMP Life on as a partner in some centres.

A factor which is of wider interest is the difference between inhouse & outsourced management.

Deloittes makes something of the AMP trust’s higher portfolio quality and the flow-on impacts of that, less of Centro’s share price premium and higher earnings/security, which are largely attributable to the different management system.

Deloittes finds AMP trust a stronger investment alone

The AMP Shopping Centres Trust owns all or part of 9 regional shopping centres round Australia, now valued at $A1.59 billion, with asset backing at 31 March of $A1.40/unit, average premium/nta in the March 2003 year 4%, weighted average capitalisation rate 7.4%. Deloittes calculated that the merged entity would have 7.9% lower asset backing.

Centro has 3 regional centres, about 25 subregional centres, has increased the services business share of its total earnings to 11.6% (a mixture of property management, development & leasing and funds management) and has a syndicate business in which it generally takes a 25% stake in each fund plus the management role.

Centro’s portfolio value is $A1.7 billion, average premium/nta 24%, capitalisation 8.7%. Deloittes found the average subregional centre yield had firmed over the 5 years to December 2002 from 10.5% to 9.05%, to Centro’s benefit. Centro’s shares were converted to stapled securities in 1997 and distributions were effectively increased 11% in the June 1999 year, but were now in line with the sector average. Deloittes said there was no guarantee Centro’s future performance would benefit from further re-rating.

Gearing at the AMP trust ranges from 20-30%, at Centro from 30-40%, with a 40-60% range in Centro’s syndicates.

An important comparison that can’t escape the institutions’ eyes is the difference between specialty store sales at December 2002 — $A7805/m² across the AMP trust’s portfolio, an average $A7335 across the regional centre sector according to JHD Advisors, an average $A5772 across subregional centres according to JHD, and an average $A5680/m² across the Centro portfolio.

Not only is Centro weaker than AMP, it’s weaker than its own market’s average.

Deloittes calculated that the net result of turning management inhouse would be $A5 million/year, an income support arrangement – entered when AMP set up the shopping centre trust and running to 2005 – would benefit the merged entity by $A6 million in the next year, but debt refinancing would cost Centro more (an average borrowing cost of 6.4% at Centro, 6%at AMP).

Now that the AMP trust is in play, even an outright rejection of the Centro bid is unlikely to leave it as it is for long, especially with a Westfield presence on the register.

The 1st of the AMP trust board’s reasons for rejecting the Centro offer is the prospect of a superior offer – effectively asking the market to make a better bid, at least matching Westfield’s $A1.80/unit.

The market continues to expect rationalization of the listed property trust sector. In this case, a pure-play regional centre portfolio would become the top shelf of a diversified investor’s cabinet.

The unlisted AMP NZ Property Fund (now called the AMP Property Portfolio) owns 50% of the Botany town centre, Lynmall & Manukau Supa Centa. It sold the other 50% to the Australian listed AMP Diversified Property Trust last August for $NZ188.125 million.

Earlier stories: Westfield increases AMP trust stake, trust drops bombshell for Centro