Tag Archives | Augusta

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 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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NPT considering more than just Augusta’s proposal

NPT Ltd’s board stalled yesterday in responding to Augusta Capital Ltd’s bid for a deal combining an increase in NPT assets and a buyout of its management contract.

The NPT board said 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.

The board said it had also sought NZX guidance on some aspects of Augusta’s request for a special shareholder meeting.

Augusta said it wanted to tip the 3-man NPT board and install its own nominees after NPT chair Sir John Anderson didn’t respond to the proposal.

Augusta bought a 9.26% stake in NPT from the Accident Compensation Corp at the end of September.

NPT chief executive Tony Osborne said yesterday the small listed property company had “engaged with external expert advisors to provide robust assessment of the merits of each proposal. Since the Augusta proposal was disclosed to the market, further parties have expressed interest in submitting proposals and the board remains open to reviewing these as well.

“The proposals are all non-binding, indicative & incomplete, and no agreements have been entered into. The board is committed to ensuring that through this process of evaluation the best interests of the company & all its shareholders will be foremost in their minds. Once all aspects of the proposals have been fully assessed, the board will be in a position to provide a further update to the market.”

Earlier stories:
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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Fourth era for NPT a hard option to combat

The board of always-too-small NZX-listed property investor NPT Ltd faces an ultimatum from Augusta Capital Ltd which it will be hard to combat.

Augusta has converted itself almost entirely into a fund manager after selling its also-small directly owned portfolio (with some of the Finance Centre sale spread through to 2019). Then, at the end of September, it bought a 9.26% stake in NPT from the Accident Compensation Corp, 9c up on the previous day’s opening share price and 1c below the 74c/share asset backing.

At the end of last week Augusta made its manoeuvres public: 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.

NPT chief executive Tony Osborne told the NZX late on Friday the board would consider, respond and update shareholders late this week.

Augusta intends to hold property short-term on a co-investment or warehousing basis but otherwise intends to be a portfolio manager, and it would do the same with NPT. Against its own near-zero direct holdings and NPT’s $169 million portfolio, Augusta is managing 155 properties worth $1.4 billion, held by syndicates & funds.

Augusta’s history is short: launched in 2006 as Kermadec Property Fund Ltd with a $100 million portfolio, and 50% (now 100%) of Augusta Funds Management Ltd.

NPT has survived through 3 eras back to its formation in 1994 by Paul Dallimore, then based in Dunedin and later in Christchurch. St Laurence Holdings Ltd (Kevin Podmore & Mike O’Sullivan) took control of the trust management company in 2005.

Former Brierley Investments Ltd director Sir Selwyn Cushing & his son, David, argued in 2008 that the trust should be liquidated. They opposed a fee structure which, while reducing percentages taken out, still wasn’t good enough (the base fee was to be cut from 0.75% of gross assets to 0.6% up to $300 million, 0.5% beyond that), and the proposal was defeated. Mr Cushing said at the time: “Gains will be totally eroded by a huge increase in property services fees and there is only one winner here, and that’s St Laurence.”

Post-St Laurence’s demise, and a change from trust to company, NPT has trundled along without growing, with quake-damaged property in Christchurch (now recovering), with a small but dispersed portfolio, and with no clear pathway to enhance earnings.

External management again

The board will be wary of letting another external manager in, but the Augusta proposal is very different from St Laurence’s, which ended with internalisation in 2010. Augusta has found assets to enhance NPT’s direct ownership and, through its continuous search for assets to syndicate, will be able to supply NPT with more. Questions on fees will come out in the wash.

Augusta’s initial proposal would lift the NPT portfolio to $500 million. To move forward, it wants to remove NPT’s chair, Sir John Anderson, and directors Tony Sewell (appointed only at the end of August) & Jim Sherwin, and replace them with its own chair, Paul Duffy, and 2 independent directors, Bruce Cotterill & Allen Bollard.

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.

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.

NPT owns a $169 million portfolio of 5 dispersed & disparate properties – the Eastgate shopping centre & Print Place industrial property in Christchurch, the AA Centre office tower & rebranded 22 Stoddard retail centre (ex-Roskill Centre) in Auckland, and Heinz Wattie’s national distribution centre in Hastings.

All 3 acquisitions Augusta has proposed are office buildings:

  • The first valued at $157 million, with a weighted average lease term of 7 years and cap rate of 6.84%
  • The second valued at $143 million, with a weighted average lease term of 14 years (an estimated weighted average lease term of 12 years at completion and 2 years’ cashflow during construction) and cap rate of 6.2%
  • The third valued at $29 million, with a weighted average lease term of 5.5 years and cap rate of 6.3%, and
  • Overall, a weighted average lease term of 9.9 years and cap rate of 6.51%.

Earlier story:
27 September 2016: Augusta buys 9% of NPT

To check back through Augusta & NPT’s histories, click in the top navigation bar on Sectors/Gainz/securities NZ/company.

Links:
Augusta
NPT

Attribution: Company releases & websites.

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