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Cotterill takes chair at NPT

Bruce Cotterill (pictured) replaced Tony Sewell today as chair of NZX-listed property company NPT Ltd, following the success at last Friday’s special shareholder meeting of 5 resolutions to change board membership.

Mr Sewell, who’d replaced the retiring Sir John Anderson as chair on 17 March, and Jim Sherwin were voted out, Carol Campbell’s position as an independent director wasn’t questioned and she remains on the board, new directors Mr Cotterill & Allen Bollard have been declared independents and the other new director, Augusta Capital Ltd chair Paul Duffy, is not independent.

Augusta bought 9.26% of NPT last August, tried unsuccessfully to get Sir John to call a shareholder meeting on its proposals, which included taking over NPT’s corporate & portfolio management, and took its holding to 18.85% a fortnight ago.

The first resolution at Friday’s meeting, recommending shareholders support a proposal by Kiwi Property Group Ltd to sell NPT 2 properties and buy the management rights for NPT’s portfolio, was defeated with a 54.87% vote against.

Mr Cotterill was New Zealand managing director and then regional managing director of real estate consultancy Colliers Jardine for 5 years in the 1990s. 2 years ago he was appointed an independent director of Pumpkin Patch Ltd. He’s also chaired Noel Leeming Group Ltd and been managing director & chief executive of Yellow Pages Group Ltd and a director of Woosh Wireless Ltd. Now he chairs Move Logistics Ltd, NZ Retail Property Group Ltd’s advisory board and Swimming NZ.

Mr Bollard is a former finance director of the Fletcher Building Group (when it was part of Fletcher Challenge Ltd) and property developer & investor Unity Group, and was chief executive & chief financial officer of Tramco Group Ltd for 9 years before moving into business consulting & governance on his own account in 2012, primarily in property & construction. He’s a director of Viaduct Harbour Ltd, Ross Green’s Riverside Industries Ltd and Tamaki Makaurau Community Housing Ltd.

Former DNZ Property Fund Ltd (now Stride Property Ltd) chief executive & executive director Paul Duffy joined Augusta’s board last November and took over chairing it when Peter Wilson retired in December. Mr Duffy was at DNZ for 13 years, leading its transformation from a large group of syndicates through its NZX listing in 2010 and on to building a $950 million portfolio of managed & directly owned properties. DNZ changed its name to Stride Property Ltd last year. Before joining the DNZ group, Mr Duffy had a long career at Fletcher’s, finishing as general manager of Fletcher Property Ltd and a director of the Fletcher Development Co Ltd.

Earlier stories:
21 April 2017: Augusta wins fight for NPT
7 April 2017: Augusta lifts stake in fight for NPT
31 March 2017: An unlikely twist could still derail NPT’s Kiwi deal
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 wins fight for NPT

Augusta Capital Ltd – kept at bay for 8 months by former NPT Ltd chair Sir John Anderson – won control of the smaller NZX-listed property company today.

Shareholders voted 54.87% against the NPT board’s preference for Kiwi Property Group Ltd to sell 2 properties to NPT and become a cornerstone shareholder, then supported the ousting of 2 directors and appointment of 3 Augusta nominees.

Mr Sewell joined the NPT only last year and replaced Sir John as chair on 17 March.

If anybody was swayed at today’s meeting, it would have been by a handful of figures produced by Salt Funds Management Ltd managing director Matt Goodson, who turned around appearances on returns from competing Kiwi & Augusta proposals, and by both a persuasive address and subsequent pointed interjections from Augusta managing director Mark Francis.

Augusta didn’t have a proposal before today’s meeting. It made one last August when it bought 9.26% of NPT – raised to 18.85% 2 weeks ago – but, for the meeting, only put up resolutions to oust Mr Sewell & Jim Sherwin and install Augusta chair Paul Duffy and 2 independents, Allen Bollard & Bruce Cotterill. Carol Campbell was the one existing director whose position wasn’t questioned.

Both Augusta & Kiwi had proposed buying NPT’s management contract, on very different terms. Augusta’s buyout wasn’t up for a vote today, but the board vote means it can be put in place.

Attribution: Meeting, company release.

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Augusta lifts stake in fight for NPT

The fight for control of NZX-listed NPT Ltd heated up today as Augusta Capital announced it had increased its stake to 18.85%, 2 weeks ahead of a shareholder meeting where the board has recommended supporting a proposal by Kiwi Property Group Ltd.

Augusta bought 9.26% of NPT last August, proposed selling assets into it and taking over company & asset management, then added a proposal to replace the NPT board when NPT was slow to call a shareholder meeting.

That meeting has only just been called, for Friday 21 April, but the only part of it relating to Augusta’s proposal is the vote on board seats – to remove directors Tony Sewell & Jim Sherwin, leaving Carol Campbell as the one remaining member from the existing board, and appointing Augusta nominees Allen Bollard, Bruce Cotterill & Paul Duffy. The NPT board not only favoured Kiwi’s proposal, but set out what it didn’t like about Augusta’s.

Augusta chief executive Mark Francis said today the company had bought 9.59% of NPT from other shareholders for $10,559,674, with settlement to occur next Tuesday, 11 April.

“Following that, Augusta Capital will be the largest shareholder in NPT,” he said. “This week’s acquisition of shares in NPT is consistent with our longstanding plan to grow our funds management business and significantly, it strengthens our position ahead of the NPT special meeting on 21 April.

“Having now carefully assessed the Kiwi Property proposal being recommended by the NPT board, we remain firmly of a view that it is not in the interest of NPT shareholders. While we respect Kiwi Property, the current proposal is heavily skewed in their favour – falling well short of what we consider to be fair & reasonable for NPT shareholders.

“Augusta intends to vote against the Kiwi Property proposal and is aware of a number of other shareholders who have indicated their intention to vote against the Kiwi Property proposal. We would encourage all NPT shareholders to seek independent specialist advice concerning its merits before casting their vote.

“We believe the current board is completely out of touch with its shareholders in recommending this deal, and Augusta Capital will also be voting for change through resolutions 2-6, to remove 2 of the current board members, noting that the previous chairman has already stepped down.”

Earlier stories:
31 March 2017: An unlikely twist could still derail NPT’s Kiwi deal
27 March 2017: Kiwi proposal for NPT finalised “in next few days”
6 March 2017: NPT works through detail of Kiwi bid
12 January 2017: Augusta drops court action but NPT meeting likely delayed
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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An unlikely twist could still derail NPT’s Kiwi deal

NPT Ltd shareholders can replace 2 of their 3 directors with Augusta Capital Ltd nominees at a special meeting called for 21 April, but won’t have the opportunity to vote on Augusta’s proposals for changing their company because Augusta has withdrawn it.

The NPT board has recommended a proposal from Kiwi Property Group Ltd, under which Kiwi would become a 19.9% cornerstone shareholder through the issue of $48 million of new shares and would sell 2 buildings to NPT. That proposal will require NPT to borrow $87 million and raise $94 million from shareholders through a pro rata entitlement offer.

The notice of meeting, sent out yesterday, contains a 2-part resolution authorising the $230 million purchase of the Majestic Centre in Wellington & North City shopping centre in Porirua, and authorising the issue of shares to Kiwi.

The remaining resolutions are to remove directors Tony Sewell & Jim Sherwin, leaving Carol Campbell as the one remaining member from the existing board, and appointing Augusta nominees Allen Bollard, Bruce Cotterill & Paul Duffy.

Tony Sewell.

Mr Sewell, former chief executive of Ngai Tahu Property Ltd, joined the NPT board last August and replaced Sir John Anderson as chair on 17 March. Sir John had headed the board for 6 years.

Mr Duffy, former DNZ Property Fund Ltd (now Stride Property Ltd) chief executive & executive director, joined Augusta’s board last November and took over chairing it in December.

Assuming support for the Kiwi deal, those board changes would be an off-the-wall extreme. NPT’s board saw this as a proposal in Augusta’s own interests.

Management contract offers

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 for $3.5 million and, because of the NPT board’s resistance, replacing the 3 directors.

In December, Kiwi came to the NPT board’s rescue with a proposal to inject 2 of its properties, becoming a cornerstone shareholder, also buying out the management contract, but leaving the NPT board intact for the moment though with a succession plan.

The management contract buyout will cost Kiwi $6 million. Either party can terminate the management agreement after 5 years on payment of a termination fee to Kiwi.

In yesterday’s meeting announcement, Mr Sewell said externalising management wasn’t the NPT board’s preferred position, because the company only internalised it in 2010, but it was an integral part of Kiwi’s proposal: “After taking into account the benefits that a strategic partnership with Kiwi Property is expected to provide to NPT, the appointment of Kiwi Property as manager of NPT & its property portfolio on the terms negotiated with Kiwi Property is acceptable to the board, particularly as the management agreement includes the right for NPT to terminate.”

Mr Sewell said NPT & Kiwi had finalised terms and entered into conditional agreements to give effect to the proposal. Mr Sewell said: “The NPT board supports the Kiwi Property proposal, which it considers to be a transformational transaction that would reposition NPT with the scale & resources to best serve its shareholders’ interests into the future, and unanimously recommends shareholders vote in favour of the proposal.”

Mr Sewell said the Kiwi deal was expected to increase NPT dividends for the March 2018 year by 7%, pro forma.

He said the terms of the entitlement offer hadn’t been determined yet, but expected NPT would send an offer document to shareholders in late April.

Assessment of Augusta proposal

Although the Augusta proposal is no longer before shareholders, NPT included an assessment of it in its notice of meeting.

The NPT board said the Augusta proposal:

  • would result in a significant decline in NPT’s earnings & dividends relative to its projected earnings & dividends on a standalone basis (this compares to an expected increase in earnings & the level of dividends for the 2018 financial year under the Kiwi proposal relative to NPT on a standalone basis)
  • was highly reliant on an increase in NPT’s gearing position (total debt:total assets) to a level higher than under the Kiwi proposal in order to achieve any enhancement in earnings or dividends for shareholders compared to the expected position for NPT for the next financial year, and
  • the properties to be acquired under the Augusta proposal are lowrise Auckland office buildings with the majority of the rent received from single tenants. The board was concerned that the low yields offered by the buildings did not take into account longer-term tenancy risks and provided NPT with no real options in the event of increases in interest rates
  • NPT would be insufficiently compensated for selling effectively perpetual management rights to Augusta. The payment proposed by Augusta was the lowest under the proposals NPT received
  • there is potential development risk associated with the Augusta proposal, with construction of one of the 3 properties to be acquired having only just started (this property would represent about 28% of the NPT portfolio by value post-transaction on a pro forma basis)
  • the properties to be acquired under the terms of the Augusta proposal were not owned by Augusta and Augusta did not necessarily have direct control over them, thereby introducing significant transaction uncertainty relative to the Kiwi proposal, and
  • the amount of additional debt & equity capital required by NPT under the Augusta proposal was significantly more than under the Kiwi proposal. There would therefore have been substantially greater execution risk under the Augusta proposal.

NPT has called the special meeting for Friday 21 April (11am at Link Market Services Ltd, Deloitte Centre, 80 Queen St).

Kiwi weighs in with support for deal

Kiwi Property also stated its own view yesterday on how the 2 listed companies would progress their relationship. Kiwi chief executive Chris Gudgeon said: “The partnership proposal will align the interests of the 2 listed property companies and provide a clear pathway to grow value for both companies. The proposal has the potential to deliver NPT shareholders with an immediate lift in earnings and increases NPT’s scale & relevance, positioning the company to grow & prosper.

“Our proposed management agreement with NPT is best in class and offers NPT shareholders an ability to terminate the agreement without cause, if they should ever deem this to be in the best interests of the company, at some point in the future.

“Kiwi Property’s interests will be aligned with NPT shareholders’ through its 19.9% shareholding in NPT and we will be strongly motivated under the terms of the management agreement to perform for NPT shareholders.”

Kiwi chair Mark Ford said: “This partnership proposal is a logical opportunity to create further value for our shareholders by using our existing property & funds management platform to generate additional management fee income.

“We will retain an interest in North City shopping centre & the Majestic Centre through our shareholding in NPT, and the proposal also serves to release capital which we can use to fund our planned expansion of Sylvia Park shopping centre.

“If we receive the support of NPT shareholders to our proposal, we can help drive NPT’s future investment performance by using our specialist management capabilities to intensively manage their assets and by seeking investment opportunities that create further value for NPT shareholders.”

Earlier stories:
27 March 2017: Kiwi proposal for NPT finalised “in next few days”
6 March 2017: NPT works through detail of Kiwi bid
12 January 2017: Augusta drops court action but NPT meeting likely delayed
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: NPT & Kiwi releases, proposal documents.

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Kiwi proposal for NPT finalised “in next few days”

NPT Ltd expects to conclude arrangements with Kiwi Property Group Ltd in the next few days on Kiwi’s proposal for NPT’s future.

NPT chief executive Tony Osborne said today the company expected to hold a special shareholder meeting in April.

Kiwi has proposed:

It will sell The Majestic Centre & North City Shopping Centre (the Kiwi Properties) to NPT for $230 million
It will pay NPT a one-off $6 million to acquire the right to manage NPT & its property portfolio, and
It will take a cornerstone shareholding in NPT of about 19.9%.

Earlier stories:
6 March 2017: NPT works through detail of Kiwi bid
12 January 2017: Augusta drops court action but NPT meeting likely delayed
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 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 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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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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