29 Mar 2021

Precinct Properties paying $215m to end contract with AMP

12:34 pm on 29 March 2021

Precinct Properties is taking back control of its management from AMP.

Precinct Properties owns buildings such as Number 1, The Terrace and the State Insurance Building in Wellington.

Photo: PHOTO NZ

The property investor and developer is ending its long-running management agreement AMP Haumi Management at a net cost of $145 million, which it said would save ongoing management fees and set it up better for the future.

"The independent directors believe that internalisation will best position Precinct for future growth and is an appropriate progression considering the scale and breadth of Precinct's business," chairman Craig Stobo said.

Precinct will pay a gross fee of $215m to cut the contract, which will be reduced by $70m after a ruling that the cost is tax deductible.

Stobo said the move would save the company $14.6m a year in fees, deliver an immediate $10m saving from not having to pay fees on current projects, and lift its operational revenue.

"Importantly, Precinct will retain key management personnel and the transaction positions Precinct to deliver on the next phase of its strategy."

He said AMP had steered the company to complete more than $1.5 billion of developments over the past decade, but said last year it was reviewing its portfolio.

"As independent directors needed to act quickly and with certainty given competing interest, and to ensure Precinct was able to secure all the benefits of internalising management, an NZX waiver was obtained so that the transaction did not require a shareholder vote," Stobo said.

He said specialist advice was that the value of ending the contract would "significantly exceed" the after-tax cost of terminating the agreement.

The termination payment will be funded through a new $250m bank loan, which will lift its overall debt level.

Precinct owns major office buildings in Wellington and Auckland, including the newly-opened Commercial Bay complex, as well as owning Generator NZ, which offers flexible office space.

Get the RNZ app

for ad-free news and current affairs