The Augusta Property Fund’s long-settlement purchase of the Albany Lifestyle Centre from Argosy Property Ltd fell through on Friday, which was to have been settlement day.
However, Augusta Capital Ltd chair Paul Duffy & chief executive Mark Francis said they were looking at a later launch of the fund and were talking to fund property vendors, while Argosy chief executive Peter Mence suggested an option.
The property fund’s manager, NZX-listed Augusta Capital, announced its $89 million purchase of the Albany property in May last year.
Instead of settling, Augusta announced on Friday that it was withdrawing the initial offering for the fund. The day before, Sydney funds management company Centuria Capital Group withdrew its takeover bid for Augusta.
Announcing the decision not to proceed with the Augusta Property Fund now, Mr Duffy & Mr Francis said on Friday: “The decision was made in light of the Covid-19 lockdown & the effect of this lockdown on a number of the tenants in the Augusta Property Fund’s initial properties.
“As a result of that lockdown, rental relief is likely to either apply or be sought by tenants and the Augusta board considered that the representations made in the fund’s product disclosure statement were no longer correct.
“All money raised will be returned to registered investors in the next week.
“Discussions are ongoing with the vendors of the relevant properties with a view to relaunching the fund at a later date.”
None of this is surprising. As the corona virus Covid-19 has taken hold around the globe, share prices have plummeted. Property entities have thus been unable to put any values on assets or their own overall worth, making the launch of debt-backed ventures such as Augusta’s new property funds impossible to sell to banks, let alone to potential investors.
Augusta’s share price on 28 January, the day before the Centuria bid announcement, was $1.67. It rose to $1.975 the next day, hit $2.17 on 14 February and peaked at $2.175 on 20 February. From $2.12 on 5 March, the price plunged to 97.5c on Thursday, 91.5c on Friday.
When Augusta opened investment in the property fund on 12 February, the parent company’s share price was $2.01.
Argosy’s share price has also dived. In the last month, it’s fallen from $1.41 on 28 February to 76c on 23 March, recovering to 86c on 26 March and losing a cent to 85c on Friday.
Argosy’s shares sat in a price belt of $1.25-1.48 for the whole of the previous 12 months, apart from one day’s venture up to $1.515 (on 9 September).
Confirming on Friday that the settlement wouldn’t take place as planned, Argosy chief executive Peter Mence said: “We have been advised that the purchasers, Cook Property Group Ltd (Ben Cook), who nominated APF Nominee Ltd as custodian for Augusta Property Fund, are unable to settle the unconditional sale & purchase agreement.
“Given the unprecedented times we’re currently in, we are in discussions with the purchasers to retain the contract on foot and defer settlement for 3 months. Argosy will retain the $4.5 million non-refundable deposit and will continue to receive rental income from the property.”
The property in question was on Argosy’s books a year ago – at its 31 March 2019 balance date – at a valuation of $87.5 million, with a passing yield of 6.79%.
Augusta announced its purchase of the Albany property last May, for $89 million at a 6.84% initial yield, with settlement scheduled for yesterday, Friday 27 March.
The split-level bulky goods centre, at 260 Oteha Valley Rd, opened in 2009 and has 12 tenants, anchored by a Mitre 10 Mega store on a lease through to 2033. It has a weighted average lease term of 7.65 years & net lettable area of 25,029m².
The other 9 retail tenants include Freedom Furniture, the Design Store & Danske Mobler, and there are 2 office tenants, E-Road & NZX.
27 March 2020: Augusta pulls property fund IPO
27 March 2020: Centuria ends Augusta bid
18 March 2020: Asset Plus pulls rights issue
11 March 2020: Asset Plus announces rights offer, Augusta to cut its stake
17 February 2020: Augusta defers tourism fund, expects earnings cut
7 February 2020: Augusta launches new fund next week
27 September 2019: Augusta signs Queenstown hotel manager, sets Tourism & new diversified fund targets
24 May 2019: Augusta doubles profit as it continues preparing new funds
24 May 2019: Augusta buys Albany Lifestyle Centre from Argosy for new fund
31 January 2017: Argosy sells land next to Albany Mega
5 July 2010: Cornerstone’s Martin starts looking up after Albany deal & Sentinel penthouse sale
25 November 2009: Cornerstone’s Albany land goes quietly on to market
16 September 2009: Battle over Cornerstone’s Albany land hits courtroom
20 October 2008: Cornerstone’s Albany land sale falls through, Orewa properties on market, Sentinel buyer still to settle
9 November 2006: Symphony proposes Albany bulk retail centre
Attribution: Argosy, Augusta.