Archive | Augusta Capital

NPT works through detail of Kiwi bid

NPT Ltd chair Sir John Anderson said on Friday negotiations were progressing constructively with potential cornerstone shareholder Kiwi Property Group Ltd, but he still hasn’t set the date for a shareholder meeting to consider offers.

NPT said on 11 January the original bidder to take the company over, Augusta Capital Ltd, had dropped its High Court quest to get that meeting brought forward, and Sir John didn’t mention Augusta in his statement on Friday.

On the Kiwi proposal, he said: “Attending to the finer details of the management agreement, sale & purchase agreements and terms of the share subscription, as well as arrangement of other funding for the transaction, is taking longer than initially expected.

“It is critical that the board & Kiwi take the time to get this level of detail right, and for the board to ensure that it achieves the best possible position for NPT & the shareholders in the circumstances.”

He expects the shareholder meeting will now be held in April.

Attribution: Company release.

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Augusta launches Mercury syndication

Augusta Funds Management Ltd has launched the syndication of the new $143 million Mercury NZ Ltd headquarters at 33 Broadway, Newmarket.

Syndicate interests are a minimum of $50,000. The offer is being promoted through Bayleys Real Estate and is fully underwritten, including $33 million from Augusta Capital.

Mercury intends to consolidate its 4 Auckland offices in the one 5-green-star building, at the roundabout across the road from the Newmarket Olympic pool. Mercury will be on a 12-year lease. Other tenants have not yet been named.

The building is under construction by Mansons Broadway Ltd with settlement (but not building completion) scheduled for 1 July. Mansons will provide a 10-year capex guarantee from completion.

Augusta is offering syndicate investors a forecast 7%/year pretax return paid monthly from settlement for the first 2 years 9 months, and says the leases will provide 3%/year growth.

When Augusta entered into the agreement in December to acquire the unfinished development, Augusta managing director Mark Francis said it was a new phase in syndicate investment strategy: “Augusta believes this transaction signals a key strategic step as it moves from not simply being a buyer of investment grade assets but into funding & development of investment grade assets.”

Under the agreement, the Augusta syndicate will acquire the property and Mansons will continue to construct the building for that investment entity.

The total consideration is $143,111,878, with a fixed amount payable at settlement, further drawdowns made on a cost-to-complete basis as the development progresses, and retention amounts payable on achievement of certain development & leasing milestones.

During the development phase, Mansons will pay interest on the equity component of the consideration and all bank interest costs of the syndicate/fund that acquires the development.

Earlier story:
22 December 2016:  Augusta takes new step in syndication

Attribution: Agency release.

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Augusta drops court action but NPT meeting likely delayed

Augusta Capital Ltd has dropped the High Court proceeding it lodged against NPT Ltd to force an earlier shareholder meeting on an Augusta proposal to inject properties into NPT and replace the NPT board.

NPT had said it would send shareholders the meeting date this month and that it intended to hold the meeting in February to consider Augusta’s & other proposals. However, NPT chair Sir John Anderson told NZX yesterday that, “at this stage, it intends to issue the notice of meeting in February and hold the meeting as soon as possible after that”.

Augusta proposed injecting 3 properties worth $327 million into the company and buying out the management contract. In December, NPT disclosed a competing proposition from Kiwi Property Group Ltd, which proposed injecting 2 of its properties worth $230 million, becoming a cornerstone shareholder with a stake up to 19.9%, also buying out the management contract, but leaving the NPT board intact for the moment though with a succession plan.

Sir John said Augusta’s court action was “an unfortunate distraction. The proceedings were not constructive.

“We are very committed to engaging with shareholders as soon as possible on the very important matters before the company. We will make every effort to hold this shareholder meeting in February, but are conscious that the process of due diligence of the Kiwi Property assets, negotiation of terms and preparation of the shareholder information memorandum may mean this is not possible. In the event of a delay, we certainly expect to be in a position to issue a notice of meeting in February, with a view to holding the meeting soon thereafter.

“Unless Augusta formally withdraws its proposed resolutions, we will still put those to shareholders at the meeting. At the same time full details of the transactions proposed by Kiwi Property Group will be provided to shareholders together with the resolutions required by NZX listing rules for consideration.“

Earlier stories:
8 January 2017: NPT interim report shows company treading water
14 December 2016: Kiwi proposal for NPT revealed
2 December 2016: Augusta gets February court date while NPT continues with meeting plan
23 November 2016: Lack of revaluations halves NPT profit
4 November 2016: NPT considering more than just Augusta’s proposal
31 October 2016: 
Fourth era for NPT a hard option to combat
27 September 2016: 
Augusta buys 9% of NPT

Attribution: Company release.

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NPT interim report shows company treading water

Under-siege listed property investor NPT Ltd posted its interim report & presentation on 30 December, confirming that it remains little more than a vehicle for somebody else’s greater purpose.

The accounts show the company’s 5 properties have overall occupancy of 98.1% – Print Place in Christchurch, a $13 million property, and the $27.2 million Heinz Wattie’s Warehouse in Hastings both on 100%, the $35 million Roskill Centre in Auckland on 97.5%, $58 million Eastgate Shopping Centre in Christchurch on 96.2% and the $36.7 million AA Centre in Auckland down at 92.2%.

Net rental climbed from $5.48 million in the September 2015 half to $6 million in March 2016, but declined to $5.54 million in the September 2016 half.

Directors said in their 30 December presentation the special shareholder meeting planned for February would determine the company’s strategic direction. Meanwhile, they’d focus on unlocking value within the existing portfolio, including looking to further value-add opportunities at Eastgate.

“Given the strong Auckland cbd office leasing market, we will upgrade an additional floor at the AA Centre.”

In an ironic poke at the fluctuating management style – in & out of house over the years, and heading out again no matter who wins the battle for control – NPT would “leverage the closer tenant relationships following the internalisation of the property management function”.

Augusta Capital Ltd bought 9.26% of NPT last September and proposed injecting 3 properties worth $327 million into the company, buying out the management contract and, because of the NPT board’s resistance, replacing the 3 directors.

In December, Kiwi Property Group Ltd came to the board’s at least temporary rescue, if not the company’s, with a proposal to inject 2 of its properties worth $230 million, becoming a cornerstone shareholder with a stake up to 19.9%, also buying out the management contract, but leaving the NPT board intact for the moment though with a succession plan.

When St Laurence Holdings Ltd acquired the management contract on 1 December 2005 for what was then The National Property Trust, it had $268 million in assets. At November 2007 it had $318 million of assets & $184 million of equity. When unitholders agreed to convert the trust into a company at the end of 2010, assets were down to $189 million following global financial crisis revaluations & sales. Impacts from Canterbury’s earthquakes in 2010-11 and the collapse of management contract owner St Laurence drove the portfolio value down to $162 million at September 2011.

It took another 5 years, to September 2016, to get the portfolio back up to $170 million, with net equity at $120 million.

The NPT board hasn’t set a date yet for the special shareholder meeting which will determine the company’s future, beyond saying it will be in February.

Links:
NPT, interim result presentation
NPT, interim report
Kiwi Property proposal

Earlier stories:
14 December 2016: Kiwi proposal for NPT revealed
2 December 2016: Augusta gets February court date while NPT continues with meeting plan
23 November 2016: Lack of revaluations halves NPT profit
4 November 2016: NPT considering more than just Augusta’s proposal
31 October 2016: 
Fourth era for NPT a hard option to combat
27 September 2016: 
Augusta buys 9% of NPT

Attribution: Company release.

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Augusta takes new step in syndication

Augusta Capital Ltd subsidiary Augusta Funds Management Ltd has entered into an agreement with Mansons Broadway Ltd to acquire the unfinished development at 33 Broadway, Newmarket, for syndication.

Augusta managing director Mark Francis said today it was a new phase in syndicate investment strategy: “Augusta believes this transaction signals a key strategic step as it moves from not simply being a buyer of investment grade assets but into funding & development of investment grade assets.”

He said that, under the agreement, an Augusta-nominated syndicate or fund would ultimately acquire the property following an equity-raising. Mansons will continue to construct the building for that investment entity.

The total consideration is $143,111,878, with a fixed amount payable at settlement, further drawdowns made on a cost-to-complete basis as the development progresses, and retention amounts payable on achievement of certain development & leasing milestones.

During the development phase, Mansons will pay interest on the equity component of the consideration and all bank interest costs of the syndicate/fund that acquires the development.

The agreement is conditional on:

  • the terms of the loan facility agreement & associated documents being agreed by all parties by 24 January
  • the anchor tenant’s approval by 31 January of the development being sold to an Augusta fund/syndicate, and
  • Mansons obtaining the anchor tenant’s agreement by 28 February to a 3-month extension to the current sunset date for the development, or being satisfied that an extension is not required.

Settlement of the acquisition by the relevant investment entity is scheduled for 1 July 2017, subject to earthworks & piling having been completed.

Augusta Funds Management has also entered into unconditional underwriting commitments for the equity component of the consideration, including $33 million from Augusta Capital. Mr Francis said the ultimate structure of that investment entity was still being finalised.

Energy company Mercury NZ Ltd intends to consolidate its 4 Auckland offices in the one 5-green-star building, at the roundabout across the road from the Newmarket Olympic pool.

Attribution: Company release.

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Kiwi proposal for NPT revealed

NZX-listed NPT Ltd chair Sir John Anderson revealed a second offer yesterday which he said the board preferred over one from Augusta Capital Ltd, this one coming from Kiwi Property Group Ltd.

Augusta, which became a 9.26% NPT shareholder in September, has been trying to get an NPT shareholder meeting called to consider its proposal, which involves injecting 3 properties worth $327 million into NPT, buying out the NPT management contract and, because of the NPT board’s resistance, replacing the 3 directors.

Sir John said Kiwi Property proposed injecting 2 of its properties worth $230 million, becoming a cornerstone shareholder with a stake up to 19.9%, also buying out the management contract, but leaving the NPT board intact for the moment though with a succession plan.

Sir John said the Kiwi proposal was one of 4 received, and the NPT board intended to recommend it to a shareholder meeting which would be called for February. He said yesterday: “As well as our own review, we commissioned an independent assessment by specialist advisors, Northington Partners Ltd, and have consulted with major shareholders. The outcome is that we believe the Kiwi Property proposal is likely to deliver the best short- & long-term benefits to shareholders.”

The 2 Kiwi properties to be added to NPT’s small portfolio are North City shopping centre, Porirua, and the Majestic Centre, Wellington. Kiwi has proposed that NPT fund the transaction via a capital raising & bank debt.

Northington Partners said its conclusion reflected the following key elements:

  • The acquisition of properties from Kiwi Property was more consistent with NPT’s existing portfolio & strategy
  • The Kiwi Property proposal would lead to an immediate & considerably higher level of earnings accretion
  • Kiwi Property would make a significantly higher payment for the externalisation of the management contract
  • Kiwi Property had proposed a more “investor friendly” management contract, with the ability to terminate without cause and the maintenance of an independent NPT board, and
  • The Kiwi Property proposal would provide NPT with the ability to leverage the Kiwi Property management resources to benefit the existing NPT portfolio.

Kiwi has proposed assuming management of the NPT portfolio for $6 million. Sir John said the management agreement could be terminated without cause, on a fee equivalent to the greater of fair market value or 2.5% of tangible assets. NPT would gain access to Kiwi’s fund & property management expertise, its shareholders would benefit from a material reduction in the management expense ratio and from potential investment performance upside resulting from the application of Kiwi’s specialist management capability.

Benefits ascribed to the proposal:

  • An increase in portfolio scale, from $170 million to $400 million, with no material increase in gearing
  • An increase in market capitalisation, from $110 million to $265 million, assisting liquidity & market appeal
  • An immediate 16% increase in earnings/share, from 3.58c to 4.16c
  • A reduction in NPT’s management expense ratio from 99 to 70 basis points/share, made possible by access to Kiwi’s management platform
  • Investment performance upside for NPT made possible by access to Kiwi’s specialist management capabilities and significant resources.

Link:
Kiwi Property proposal

Earlier stories:
2 December 2016: Augusta gets February court date while NPT continues with meeting plan
30 November 2016: NPT sticks to its programme as Augusta goes to court
 16 November 2016: NPT calls in Northington to weigh up options
4 November 2016: NPT considering more than just Augusta’s proposal
31 October 2016: Fourth era for NPT a hard option to combat
27 September 2016: Augusta buys 9% of NPT

Attribution: Company release.

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Augusta gets February court date while NPT continues with meeting plan

The scrap between 2 listed property companies, Augusta Capital Ltd & NPT Ltd, reached an odd point today: NPT, having said it will call a shareholders’ meeting for February, faces a 10 February court date on Augusta’s application to require this meeting “as soon as reasonably possible”.

Augusta said yesterday NPT’s board had been holding out since August on considering the Augusta proposals to add $327 million of properties to the NPT portfolio and for Augusta to take over NPT’s management contract.

Because of the inaction, Augusta proposed a shareholder meeting to replace the existing NPT board.

The court decision is largely irrelevant, because a 10 February hearing won’t ensure the meeting is held any earlier than the end of February.

NPT chair Sir John Anderson called the legal proceedings an “unfortunate distraction”, as the practical considerations meant an earlier shareholder meeting wasn’t logistically possible.

He said there was no compelling reason to depart from the timetable already set, and added: “We are confident that the meeting will take place before the legal process is completed, and so this action is not constructive and is in fact pointless.”

Previous story, 30 November 2016: NPT sticks to its programme as Augusta goes to court

Attribution: Company release.

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NPT sticks to its programme as Augusta goes to court

Augusta Capital Ltd has filed proceedings in the High Court seeking orders requiring NPT Ltd to call a meeting of its shareholders earlier than next February.

Augusta bought 9.26% of NPT Ltd from the Accident Compensation Corp at the end of September and put a proposal to NPT at the end of October. It wanted NPT to buy a portfolio of 3 unidentified properties valued at $329 million, it wanted to buy NPT’s management contract, and it wanted to help NPT grow its portfolio to improve returns. When NPT’s 3-man board baulked, Augusta asked for its proposal to go to shareholders and for the NPT board to be replaced.

The NPT board said in response it had already been considering other proposals “close to the date Augusta presented its proposal” and wanted to give due consideration to all of them. It engaged independent financial advisor Northington Partners Ltd to assess all proposals, said it would set a meeting date in January and expected that meeting to be in February.

On Monday, the NPT board said it had received 3 substantive proposals apart from Augusta’s.

NPT chair Sir John Anderson said its timetable was fair & reasonable, taking the Christmas break into account: “The board is concerned that Augusta is trying to play a fast game in an attempt to hurry the process in its own interests. Shareholders & interested parties should consider Augusta’s likely motives in trying to effect board changes to result in its own nominees holding the majority of board seats immediately ahead of consideration of its own proposal under which it would sell properties to NPT and assume management control of the company.

“The board remains open to Augusta’s proposal and wishes to assess that proposal and all other proposals through a robust process, and will keep shareholders regularly updated.”

Earlier stories:
16 November 2016: NPT calls in Northington to weigh up options
4 November 2016: NPT considering more than just Augusta’s proposal
31 October 2016: Fourth era for NPT a hard option to combat
27 September 2016: Augusta buys 9% of NPT

Attribution: Company release.

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Augusta marks up successes but net profit falls

Mark Francis.

Mark Francis.

Augusta Capital Ltd managing director Mark Francis said yesterday the exit from ownership of the Finance Centre buildings was transformational, but 2 other deals underpinned its success in the September half-year.

One was the launch of its first wholesale fund and the other was its largest equity-raising.

However, net profit after tax fell 28%, from $7.24 million to $5.23 million, primarily due to higher current tax expense, recognising transaction costs associated with future property disposals and fair value loss on investments.

“The confirmed exit of the Finance Centre is a transformational deal that sets Augusta clearly on the path of property funds management,” Mr Francis said in the release on the half-year result.

Augusta lifted distributable profit (a non-GAAP disclosure which represents underlying financial performance) by 50%, from $2.66 million in the September 2015 half to $4 million, and the funds management side of the business increased its return from $1.27 million to $2.78 million, driven by one-off deal fees & strong growth in recurring management fees.

Partially offsetting those gains, the return from the investment property portfolio fell 13%, from $1.37 million to $1.19 million, following divestment of 7 City Rd in August 2015 and higher tax expense due to a lower depreciation claim.

The company completed 3 new syndications and established the Value Add Fund No 1, which in total generated $4.75 million of gross offeror’s & underwriting fees, as well as creating a further $1.1 million of ongoing gross annual management fees.

The Finance Centre is subject to an unconditional sale agreement for $96 million. Sale of the 4 titles will be staged between December 2016-April 2019. Auusta recognised a $3.2 million revaluation gain and $1.4 million of transactional costs relating to the sale. The fair value of the Finance Centre at 30 September was $92.3 million. Settlement of Augusta House has been held up due to a delay in obtaining new titles.

The property held for sale at 31 March, 16 Kitchener St, was sold to the Value Add Fund No 1 on 1 April at carrying value of $16.5 million.

Mr Francis said Augusta’s current tax obligation was $1 million higher due to the strong performance, and also because no depreciation could be claimed on Augusta House (19 Victoria St West), increasing tax expense by $140,000.

Augusta confirmed on 1 July that the loss of PIE (portfolio investment entity) status became effective as a result of the continuing success & growth in value of the funds management business

Mr Francis said the group would continue with its dividend policy of paying 75-80% of full-year net profit after tax (excluding capital gains or losses, realised or unrealised).
The company’s weighted average lease term decreased from 6.3 years to 5.7 years and portfolio occupancy was steady on 97%.

Augusta bought 9.26% of NPT Ltd on 30 September for $10.95 million, at 73c/share, and has since marked the value of that stake down by $685,000 to $10.27 million, or 68.5c/share. Augusta put a proposal to NPT’s board to increase its portfolio to $500 million with the injection of 3 unnamed properties worth $327 million, and is pushing for the shareholder meeting on its proposal to be brought forward from February, which is when the NPT board intends to hold it.

Augusta completed 3 property syndications during the half-year – Building A Graham St, Ashburton Central and Quinns Hill Rd – and established the Value Add Fund No 1. It also sold 8 properties.

The group now manages 135 property vehicles valued at $1.51 billion. That figure will rise to $1.6 billion when syndication of Building B Graham St settles next Wednesday, 30 November.

Net asset backing rose from 94c/share in March to 97c on revaluation of the Finance Centre. Based on the March PWC valuation of the funds management business, Mr Francis said the indicative net asset value/share was in the range of $1.11-1.18/share.

Attribution: Company release.

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NPT calls in Northington to weigh up options

NZX-listed property investor NPT Ltd said on Monday it expects to hold a shareholder meeting in February to consider proposals for its future by Augusta Capital Ltd & other parties.

NPT has engaged independent financial advisor Northington Partners Ltd to provide advice about Augusta’s proposal.

Augusta bought a 9.26% stake in NPT from the Accident Compensation Corp at the end of September. Then, at the end of October, Augusta revealed its intentions: It wanted NPT to buy a portfolio of 3 unidentified properties valued at $329 million, it wanted to buy NPT’s management contract for $3.5 million in cash, and it wanted to help NPT grow its portfolio to improve returns. When NPT’s 3-man board baulked, Augusta asked for its proposal to go to shareholders and for the NPT board to be replaced.

NPT chief executive Tony Osborne said the NPT board met last Friday to discuss the proposals, including Augusta’s desire for the new board (comprising the 3 Augusta nominees & one other director) to negotiate the terms of the transactions to be entered into with Augusta.

“However,” Mr Osborne said, “the board of NPT believes that, in voting on the resolutions at the meeting, shareholders will require some analysis of the Augusta proposal to help in determining what a vote for a new Augusta board means compared to a vote to retain the existing independent board.”

NPT has asked Northington to consider whether the Augusta proposal is in the best interests of NPT & all its shareholders, and to weigh it against alternative proposals it’s received. Preliminary advice to the NPT board was that the Augusta proposal “may not provide the best option”.

NPT expects it will take 6 weeks to more fully develop options, and that a notice of meeting should go out in January for a meeting in February.

Earlier stories:
4 November 2016: NPT considering more than just Augusta’s proposal
31 October 2016: Fourth era for NPT a hard option to combat
27 September 2016: Augusta buys 9% of NPT

Attribution: Company release.

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