Archive | Securities – NZ

Kiwi Property settles second Drury site purchase

Kiwi Property Group Ltd settled its acquisition of 30.6ha at Drury on Wednesday, after receiving approval from the Overseas Investment Office a week ago to proceed.

The company intends to create a new town centre next to Stevenson Group Ltd’s mostly industrial 360ha development site.

Kiwi’s 3 greenfield sites are next to the junction of the Southern Motorway, Great South Rd and the North Island main trunk railway line, 35km south of Auckland’s city centre.

Chief executive Chris Gudgeon said: “This brings our total landholdings to 42.7ha, at a purchase price of $39.8 million. A third land parcel of 8.6ha has been secured via a right of first refusal, with the purchase price to be determined with reference to the market when the right is exercised.

Earlier stories:
13 September 2017: Kiwi Property’s Drury buy approved
10 September 2017: Second round for Auranga precinct confirms Drury as major growth centre
7 April 2017: Kiwi Property plans new town centre next to Stevenson’s Drury development
30 August 2013: Drury South industrial area plan change & MUL extension approved

Attribution: Company release.

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H&M to lead retail revival at Queensgate

Swedish fashion & homegoods retailer H&M will open its third New Zealand store in October, leading in to the return & arrival of a large number of other retailers at the quake-hit Queensgate Shopping Centre in Lower Hutt.

Kiwi Property Group Ltd brought the Swedish listed company, H & M Hennes & Mauritz AB, to New Zealand first, opening an H&M store at its Sylvia Park shopping centre in Auckland a year ago. Philip Carter’s The Crossing development in Christchurch, which incorporates offices and food & beverage outlets in a precinct which combines new & restored heritage buildings, opened the second H&M this month.

Queensgate, managed by Stride Investment Management Ltd for the Diversified NZ Property Trust, will open its H&M on Thursday 26 October, in 2700m2 on 2 levels in the Centre Court.

The Diversified trust bought the former Westfield mall from Scentre Group (NZ) Ltd in August 2016. Part of it was closed after the Kaikoura earthquake in November and a portion of the carpark & its cinema complex were demolished. After a partial reopening, the centre was fully reopened in April.

Stride shopping centres general manager Roy Stansfield said on Wednesday the company was also readying sites at Queensgate for other new stores and stores that were returning, relocating & upgrading: “We expect many of these to be completed before the busy Christmas period. These include Skechers, Bed Bath N Table, Health 2000, Portmans, Merchant, Bed Bath & Beyond and Boost Juice.

Earlier story:
9 July 2017: H&M to open at Queensgate

Attribution: Stride release.

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A year on, Fletcher board still has ‘construction nous vacancy’ pencilled in

A year after Fletcher Building Ltd’s board became aware of construction contract blowouts, the company is no nearer to appointing someone with construction nous as a director.

Sir Ralph Norris presenting the annual result in August.

Company chair Sir Ralph Norris confessed to not understanding the world of construction accounting when he addressed media on the annual result in August. He said then that the problems at the building + interiors business unit within the construction division had all come about in the 2017 financial year, first noticed in September but the extent not realised immediately.

When the half-year result was released in February, chief executive Mark Adamson said construction operating earnings were reduced due to the timing of earnings from certain projects being recognised, expensed bid costs, a reduced contribution from Fletcher EQR, and losses incurred on a major construction project.

In March, Mr Adamson had the task of explaining the blowouts. When the greater extent of the blowouts was recognised in July, Mr Adamson’s contract was ended.

At the August briefing, I asked Sir Ralph what Fletcher had done to fill the void of construction nous in its senior executive ranks, and what steps it was taking to fill that void within the board’s ranks.

Sir Ralph rattled off a long list of recent appointments to demonstrate how the company had tackled a problem aggressively, most of which the suddenly departing former chief executive, Mark Adamson, had listed when he announced a cut in earnings guidance in March, shortly before his exit.

In addition, I wanted to know how the board would acquire more construction understanding than it apparently had. Sir Ralph skirted that question, saying only that “we will have board members stepping down. We are in the process of looking at candidates – somebody with construction experience would be a very good addition to the board.”

Changes, but still a vacuum

Yesterday, Fletcher Building announced board changes – but the construction nous vacuum remained.

John Judge had already indicated he’d retire after 9 years on the board, and Kate Spargo has joined him. Mr Judge’s retirement takes effect at the end of the annual meeting on 25 October, Ms Spargo’s took effect yesterday because she was appointed yesterday as a director of ASX-listed Cimic Group Ltd, a competitor. She had chaired engineering services company UGL Ltd until Cimic acquired it early this year.

Cimic is 73% owned by Hochtief AG of Germany, which in turn is now 71.8% owned by ACS Group SA of Spain. Those stakes make the Spanish group 52.2% owner of Cimic. The former Leighton Construction, which changed its name to CPB Contractors Pty Ltd last year, won the $240 million contract to complete the design & construction of the Christchurch Convention & Exhibition Centre last month.

Bruce Hassall, appointed to the Fletcher board in March and therefore up for election at the annual meeting, will take over from Mr Judge as chair of Fletcher’s audit & risk committee.

Cecilia Tarrant, a director since 2011, is up for re-election under the rotation process. She will take over as chair of the safety, health and environment & sustainability committee from Ms Spargo.

And then came the announcement about the hunt for construction expertise: “With the retirement of John Judge & Kate Spargo, the Fletcher Building board will have 6 directors. The board is currently engaged in a process to extend its skills & experience, particularly in the area of construction & contracting.”

Online voting

2 changes that will happen at the company’s annual meeting are in attendance & voting.

Fletcher Building has told shareholders in its notice of meeting: “To encourage the widest possible participation in the shareholders’ meeting, this year Fletcher Building is introducing a hybrid meeting format where shareholders can participate by attending either in person or remotely online via Lumi AGM.

“By using Lumi AGM, shareholders will be able to watch the meeting, vote & ask questions remotely from a smartphone, tablet or desktop device.”

Earlier stories:
17 August 2017: ‘Fessed up, time to move on, says an unconvincing Fletcher boss
21 July 2017: Fletcher Building takes axe again to construction earnings, Adamson ousted
20 March 2017: Fletcher Building cuts earnings guidance by $110 million
19 March 2017: Fletcher Building to explain construction loss Monday morning
22 February 2017: Fletcher Building net up 2% after site closures

Attribution: Fletcher release & notice of meeting, Cimic release.

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Kiwi Property adds 2 banks to its funding pool

Kiwi Property Group Ltd has further diversified its sources of debt, adding HSBC Holdings plc & China Construction Bank Corp to its pool of banking lenders.

Kiwi chief financial officer Stuart Tabuteau said today the company had increased its total finance debt facilities by $75 million to $1.3 billion. It’s added a $100 million facility from HSBC on 3-, 4- & 5-year terms and a $100 million 6-year facility from China Construction Bank, and paid down $125 million of shorter-dated debt.

Mr Tabuteau said one result was to increase Kiwi’s weighted average term to maturity of its finance debt facilities by half a year to 3.5 years.

Attribution: Company release.

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Out of a selldown & rescue, Taurus has built a syndication business ready to grow

In the depths of the global financial crisis, in 2011, Auckland property syndicators Murray Alcock & Allister Knight had one particular syndicate that was going only one way: downhill. Others were shaky, at best.

6 years later, after Christchurch-based Taurus Group Ltd took control of the Aucklanders’ 9 syndicates, investors in that one are looking at daylight, the selldown of the SPI Group syndicates is otherwise almost complete, and Taurus is confident about its own future as a smallscale syndicator.

Taurus Group has 2 arms – its chartered accountancy business headed by Wayne Bailey; and a range of businesses which include capital-raising, property-structuring & syndication, headed by David Kitson (pictured above).

Property syndicate specialist Taurus Management Ltd, part of the capital & finance arm, said on Wednesday it had been granted a licence under the Financial Markets Conduct Act as a manager of managed investment schemes (excluding managed funds) to primarily invest in, or own, real property. It said it aimed to provide good opportunities for investors, mostly in the South Island.

Mr Kitson said the new licence gave the company wider scope to offer managed investment schemes to the public, in addition to the wholesale market. It is now one of 2 managed investment scheme licence holders in the South Island.

Taurus, the early syndication days

But back to the early syndication days of Taurus. In 2011, Taurus began advising SPI Capital Ltd on restructuring its $125 million portfolio of 15 properties in the office, retail & industrial sectors throughout New Zealand and, in 2012, SPI appointed Taurus to wind up the affairs of some of its syndicates.

Taurus has outlined, in an article on its website, its work in trying to deal with the 78 investors in a syndicate that owned a large industrial site in Papakura which had 5 industrial buildings in various states of tenancy & repair, the main tenant in liquidation, and a bank that wanted out.

Taurus persuaded the bank to continue its support rather than force a sale at a large loss, gathered a group of 5 of the syndicate investors willing to support a longer recovery with some extra capital, initially sold some roadfront property and is now moving to sell more of the land, and has negotiated longer-term leases.

Lesson learned: stay smallscale

Mr Kitson has distinguished between Taurus’s investment targets and those of the bigger Auckland syndicators such as Augusta Funds Management Ltd (owned by NZX-listed Augusta Capital Ltd) & Oyster Property Group Ltd (50% owned by ASX-listed Cromwell Corp Ltd, 50% by a group of 5 individuals).

Augusta, in particular, has gone for ever bigger investments and has won strong investor support.

But Mr Kitson said he learned from the SPI restructure & selldown not to get too ambitious and to hold syndicates below the $20 million level, thus requiring fewer investors.

Taurus now manages 4 syndicates with $45 million of property for a total 210 investors.

Mr Kitson said Taurus had seen money flow north to the big syndicators’ offerings, but he believed there was also a strong future in smaller syndicates, and in the South Island: “We see this as complementary to the larger syndicate managers, as the maximum individual property size we will manage is unlikely to be greater than $20 million. There are plenty of attractive opportunities in the south, with very good returns & security. And when it comes to syndicate investment, size does not necessarily matter – tenant profile, returns & security do, so it’s all about the opportunity.

“The syndicates we offer will always have fewer investors, meaning we can continue to provide personal service where investors are bigger fish in a smaller pool. We know it builds confidence to have personal & direct access to the syndicate manager.”

New licence gets Taurus Management focused

Gaining the managed investment scheme licence – a 15-month process – has meant Taurus has had to realign its business to ensure Taurus Management can grow entirely separately from its sister company, Taurus Group. Said Mr Kitson: “The new licence provides the opportunity for the company to start planning a wide-ranging portfolio in the mid-range boutique investment sector over the next 5 years.”

Through the wholesale market, the company recently settled on 9 childcare centres, mostly in the South Island, and is undertaking due diligence on a 10th centre. That scheme will soon own properties worth $25 million.

Taurus Management has also settled the purchase of a 4000m² factory & warehouse in Dunedin, where a sale & leaseback arrangement gave investors the opportunity to be part of a small boutique syndicate with a single very successful tenant. “With monthly cash distributions of 8.5%, the syndicate compares very favourably with larger opportunities in the north,” Mr Kitson said.

Taurus is also conducting due diligence on 2 Christchurch properties, with more opportunities in its sights: “There’s plenty coming up and, while the South Island is our focus, we are also considering forays into regional centres in the North Island, as long as the opportunity is right.”

Taurus Management’s chief financial officer, Michael Kohing, has been with the group since 2000. The company added a distribution manager, Andrew Dorgan, early this year after Mr Dorgan returned to Christchurch from client management & sales roles at 3 banks in London over 7 years, and 5 years in Melbourne as Westpac Banking Corp’s public sector banking team relationship director.

In June, commercial property & investment specialist Charlie Goodwin joined Taurus as a non-executive director. His career has included 6 years as head of investments & marketing for Perpetual Trust, 5 years as a director of Mainland Capital Ltd and, in the last 2 years, work as a consultant providing business case studies and appointment in August as general manager of Ashburton family investment company Tricroft Properties Ltd.

Links: Taurus Group
Taurus, Hunua syndication article: Commercial property – delivering equity growth & dividends, post-GFC

Earlier stories:
15 April 2016: Taurus Group restructures
11 November 2014: SPI directors Alcock & Knight give undertakings to FMA, including repayment
19 October 2012: SPI investors vote to stick with Highland Park cinema property
31 August 2012: Investor majority decides to terminate SPI’s Gloucester syndicate
22 August 2012: SPI Capital manager strikes short-term deal on one syndicate, calls vote on a second
20 April 2012: Syndicator concedes no return to investors in 2 accommodation syndicates 4 years after tenant Edpac’s collapse

Attribution: Company release, website, Companies Register.

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Summerset buys at Porirua for 5th Wellington village

Retirement village developer Summerset Group Holdings Ltd said today it had bought a 6ha site, price undisclosed, in the Kenepuru Landing development at Porirua for its 5th village in the Wellington region.

Kenepuru Landing is a joint residential housing project between developer Carrus Corp Ltd & local iwi Ngati Toa.

Summerset chief executive Julian Cook said the proposed village on Bluff Rd would have over 290 homes, including 2- & 3-bedroom villas & apartments, one-bedroom serviced apartments and resthome & hospital care. The village would also include Summerset’s memory care centre concept, offering 20 one-bedroom apartments in a safe environment for people with dementia.

The company expects to build 450 retirement units nationally this year.

Attribution: Company release.

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Arvida buys 3 more retirement villages

Retirement village owner & operator Arvida Group Ltd has bought 2 villages & 50% of a third from Hurst Lifecare Ltd for $106 million, funded through a combination of new equity & debt.

The villages are Mary Doyle Lifecare (Havelock North), Strathallan Lifecare (Timaru) & 50% of Village at the Park Lifecare (Wellington), which Arvida said it had bought at a 5% discount to CBRE’s 2017 valuation.

Arvida said yesterday it intended to raise:

  • $77 million through a 1:5 pro rata renounceable rights issue at $1.15/share, fully underwritten by Forsyth Barr Group Ltd
  • $16 million of shares issued to vendors, escrowed for 12 months, and
  • $16 million of bank debt, comprising $10 million of debt acquired in conjunction with Village at the Park & $6 million from existing facilities, leaving headroom for further acquisitions & brownfield development activity.

Arvida expects to complete the acquisitions in mid-October on receipt of customary third-party approvals.

It expects the rights issue offer document to be available on the NZX website next Tuesday, 19 September, and it will be sent to shareholders by 21 September. The offer will close on Monday 9 October.

The acquisitions will increase the number of Arvida villages to 29, containing 1761 care beds & 1752 retirement units.

Based on Arvida’s estimates of earnings, the acquisitions will add $9 million of underlying profit on a pro forma 2018 financial year basis and be 8% accretive to underlying earnings/share. The company said it expected to increase earnings before the 2018 financial year from development of 110 consented new units at Village at the Park & Mary Doyle.

Arvida chief executive Bill McDonald said the new units would be progressively developed over the next 4 years, and included developments nearing completion.

Hurst Lifecare & associated parties sold their Rhodes on Cashmere village to Arvida as part of the initial public offer and remain holders of shares issued in that offer. They’ve elected this time to receive a large portion of the purchase price in Arvida shares at market price.

Earlier stories:
21 October 2016: Shortfall bookbuild completes Arvida capital-raising
21 September 2016: Arvida announces rights issue to buy 3 retirement villages
27 May 2016: Arvida well ahead of forecasts
25 June 2015: Arvida buys Aria Villages
22 November 2014: Arvida sets listing price at 95c

Attribution: Company release.

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Kiwi Property’s Drury buy approved

Kiwi Property Group Ltd said yesterday it had received approval from the Overseas Investment Office to proceed with its acquisition of land at Drury, 35km down State Highway 1 from Auckland’s city centre.

The company said on 7 April it had secured agreements to acquire 3 greenfield sites totalling 51.3ha adjacent to the junction of the Southern Motorway, Great South Rd & the North Island main trunk railway line.

The Overseas Investment Office approval relates to the acquisition of a freehold interest of 39.2ha of this 51.3ha.

Kiwi Property chief executive Chris Gudgeon said yesterday: “This landholding reinforces our commitment to be part of Auckland’s future growth. Our vision is to develop a town centre to complement the existing Drury town centre, which would be staged over the next 20 years to coincide with predicted population growth, household formation & employment growth in South Auckland.”

Settlement of Kiwi’s purchase of 30.6ha of the Overseas Investment Office-approved land parcels is due to occur next Wednesday, 20 September 2017. Mr Gudgeon said Kiwi would fund it through existing debt facilities.

He said in April the acquisition price for 2 of the land parcels, totalling 42.7ha, was $39.8 million. Kiwi secured the third parcel of 8.6ha via a right of first refusal, with the purchase price to be determined with reference to the market when the right is exercised.

Earlier stories:
10 September 2017: Second round for Auranga precinct confirms Drury as major growth centre
7 April 2017: Kiwi Property plans new town centre next to Stevenson’s Drury development
31 October 2016: Work starts on 3 striking special housing area projects
24 August 2016: Work set to start after fast approval for Auranga special housing area at Drury
4 July 2015: 2 large special housing areas for Franklin
30 August 2013: Drury South industrial area plan change & MUL extension approved
4 September 2012: Drury South plan changes notified

Attribution: Company release.

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Fletcher Building adds new facilities to already worse debt position

Fletcher Building Ltd said on Friday it had arranged additional debt facilities of $345 million with 3 banks from its existing syndicate – ANZ, HSBC & Westpac Bank.

The new facility was finalised 3 weeks after Fletcher Building issued its annual report, which showed substantial available funding but a much worse debt position than a year earlier, including leverage beyond its target range.

Chief financial officer Bevan McKenzie said the company had put the debt facilities in place in line with its scheduled refinancing programme, and they’d allow the company to work with its lenders to access longer-term funding solutions: “We are very pleased to have put these facilities in place, which show the continued support we have from our lenders. Fletcher Building has a strong funding profile and will continue to work with our lenders to maintain our diverse sources of debt funding.”

Balance date figures:

The annual report, released on 16 August, showed Fletcher Building had total available funding of $2.666 billion at its 30 June balance date, of which $536 million was undrawn. It had an additional $219 million of cash on hand.

The annual report showed $198 million of drawn debt facilities maturing within the next 12 months and a further $71 million of capital notes subject to interest rate & term reset.

The group’s gearing was 35.3% (27.3% at the 2016 balance date). Gearing has returned to the target range following completion of the Higgins acquisition. Gearing is interest-bearing net debt (including capital notes):interest-bearing net debt (including capital notes) & equity.

The group’s leverage was 2.7 times (1.6 times in 2016) interest-bearing net debt (including capital notes):ebitda before significant items. The company noted in its annual report: “Whilst just outside the target range of 2.0–2.5 times, the expectation is that this will return to within the range in 2018. The average maturity of the debt is 4.7 years.”

Interest coverage was 4.7 times (5.9 times in 2016). Interest coverage is the ratio of ebit before significant items:total interest paid (including capital notes interest).

Attribution: Company release, annual report.

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Precinct sets notes interest rate

Precinct Properties NZ Ltd allocated $125 million of 4-year convertible notes today at 4.8%/year, the minimum interest rate under the offer. It has another $25 million of notes available under its priority offer.

Today’s allocation included the maximum $25 million of oversubscriptions.

Minimum application amounts are $5000 under the general offer, which closes on Friday 22 September, and $1000 under the priority offer, to eligible NZ-resident Precinct retail shareholders, closing on Tuesday 19 September.

Today’s bookbuild setting the interest rate was for participants in the general offer.

Link: Precinct notes product disclosure statement

Earlier story:
27 August 2017: Precinct launches 4-year convertible notes

Attribution: Company release.

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