Archive | Augusta Capital

Second parcel of Finance Centre sale settles

Augusta Capital Ltd confirmed last Thursday that its sale of the retail title at the Finance Centre in downtown Auckland settled that day.

The remaining 2 titles at the Finance Centre that Augusta still owns – the podium & the carpark – are contracted to settle on 1 April 2019.

Augusta managing director Mark Francis said the company had applied $18 million of the $25 million retail title sale price towards debt repayment, but overall facility limits had only been reduced by $10 million: “Drawn debt is now $42.4 million, which represents an effective loan:value ratio of 30%. The sale proceeds will provide further balance sheet capability in respect of Augusta’s strategic objectives for its funds management business.”

The first sale settled, of the 4 parcels Augusta Capital agreed to sell in 2016 for $96 million, was the $30 million sale of Augusta House on Victoria St to Heng Yue Ltd (David (Duoyu) Bei) in July 2017.

The sale excludes the original Finance Centre office tower at 191 Queen St, now owned by Sir Bob Jones’s Robt Jones Holdings Ltd.

Earlier story:
25 July 2017: Augusta confirms first sale in Finance Centre package settled

Attribution: Company release.

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Airways redevelopment syndicate closes oversubscribed

Augusta Funds Management Ltd closed its new single-asset fund – to acquire & redevelop the Airways Corp NZ Ltd premises in Christchurch – oversubscribed last Friday and will settle the purchase tomorrow.

The oversubscription means the funds manager’s parent company, NZX-listed Augusta Capital Ltd, won’t take up any units under its $15 million underwrite.

The syndicate is buying the property at 20-26 Sir William Pickering Drive for $20.5 million and will fund the development of a new building on the existing title, an air traffic control centre which will be leased to the state-owned Airways Corp for 25 years.

Earlier story:
21 February 2018: Augusta to open Airways building syndicate at weekend

Attribution: Company release.

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Augusta settles NPT management rights payment

Augusta Capital Ltd settled its acquisition of NPT Ltd’s management rights at the close of business on Monday and has taken over from internal management.

The vote by NPT shareholders a week earlier (excluding Augusta, which holds 18.85%) to switch to external management by Augusta was 96.71% in favour.

The price for the management contract was set at $4.5 million, based on 3.8 times the fees that would be paid to Augusta as manager. The contract can be ended after 5 years.

NPT chair Bruce Cotterill said Tony Osborne ceased to be NPT’s chief executive immediately, and that Augusta managing director Mark Francis, chief operating officer Guy French-Wright & chief financial officer Simon Woollams were considered to be senior managers of NPT.

NPT’s registered office will move to Augusta’s office at 30 Gaunt St (above Bayleys in the Wynyard Quarter) from Thursday 5 April.

Earlier story:
21 March 2018: Francis talks about a livelier future for NPT

Attribution: Company release.

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Francis talks about a livelier future for NPT

The vote by NPT shareholders to switch to external management by Augusta Capital Ltd was clear on Monday: 96.71% in favour.

Augusta, NPT’s largest shareholder, couldn’t vote its 18.85% stake because it was a related party. But the support of other shareholders means Augusta’s $1.7 billion of assets under management have grown by just under 10%, to $1.85 billion.

Investors in NPT shares (and the units before that) have had a lot of “what next?” moments, but it remained a small & stumbling NZX-listed property investor. As Augusta managing director Mark Francis told the special meeting to approve externalising management, Augusta has a clear interest in growing the asset base & improving performance, but taking over NPT wasn’t an option for it.

After selling its Print Place industrial property in Christchurch for $8.25 million (compared to the book value of $11 million) in December, and the AA Centre on the corner of Albert & Victoria Sts in central Auckland to SkyCity Entertainment Group Ltd last October for $47 million (settlement scheduled for July), NPT will have a $128 million portfolio of 3 properties and 2 cheques that will reduce its liabilities to about $10 million.

Investors in NPT can expect its assets to be massaged & turned over, a considerable advance from hold & hope. That’s the strategy Augusta has adopted for the syndicates it manages – previously single-asset holds, in some cases switched into a multi-asset fund, in other cases revamped & re-leased.

The Augusta model

Mr Francis told the NPT shareholders: “We’ve identified opportunities for multiple-asset funds which can be listed. The industrial fund will launch (after Easter) with about $115 million of assets, but we intend to double that.”

It will be followed by a tourism fund, based on assets under scrutiny in Queenstown & Auckland.

“Residential is another space we’ve identified. We’re seeing a lot of traction in Australia & the US. Residential is now the second biggest asset class in America.”

As for the commercial & industrial funds in New Zealand, Mr Francis said: “What most of the funds are about is yield. We felt we had underperforming assets which could be repositioned.”

Augusta’s Value Add Fund No 1 was designed with a different mandate from standard syndicates, owning a portfolio of assets, 4 now sold, the 5th under negotiation and the 6th providing returns within Augusta’s target range of an 11-14% internal rate of return.

“It is a space Augusta has a lot of strength in. The way the market has been over the last few years, yields compressing, it’s been harder & harder to find assets, hence the value-add space.”

Mr Francis said the NPT deal plus “a few things we have in the pipeline” would see Augusta’s funds under management approaching $2 billion.

Objectives

For both Augusta & NPT, he set these objectives: “We’re looking to assets that are unloved but can perform. At NPT, our over-arching objective is to close the NTA gap.

“It’s scale, not at any cost but on the right terms, and to benefit ourselves.”

He said NPT needed “a reimagined name/brand to support the growth strategy and eradicate legacy issues relating to poor performance: We’re all about the future. That’s how we see our strength and believe we can add a lot of value.”

At the shareholder meeting, the question of the NPT board’s decision to sell Print Place well under previous annual valuations was one for chair Bruce Cotterill, who said that even before Christchurch’s earthquakes it had proved hard to lease.

“We made the decision, in December we would have been down to one tenant. It’s in the wrong place, it’s got a lot more office space than industrial needs. We worked extensively on a leasing programme and it came to nothing.”

Mr Cotterill said NPT got 3 offers for Print Place, all within $250,000 of each other: “We picked the second best, which we thought had the best chance of getting there, and it became the best offer (after a slight raise).”

One shareholder raised a question about the Augusta proposal compared to what shareholders might have got had they accepted Kiwi Property Group Ltd’s management proposal last year, but both Mr Cotterill said the Kiwi offer wasn’t on the table now, while director Carol Campbell said you couldn’t go back to consider an offer shareholders had rejected.

Mr Cotterill, appointed independent chair in April 2017 when Augusta staved off Kiwi’s bid for control, told shareholders: “This board over the last year has looked at a lot of major options, including acquisition of a portfolio, (but) it’s very hard to reposition a company at the top of the cycle. The view we formed is that we need the arms & legs that a management company can provide.”

Augusta will pay $4.5 million for the management contract, which can be ended after 5 years. Mr Cotterill said the price was based on 3.8 times the fees that would be paid to Augusta as manager.

He said the next step for NPT would be “to sit down with Guy (Guy French-Wright, Augusta chief operating officer) & his team, look at what the opportunities are that they think we should be investing in. That will be the focus over the next 2-3 months.

“If it’s not supported, we’ll have to come up our own plan forward.”

Earlier stories:
2 March 2018: NPT sets meeting date on externalising management
9 February 2018: Augusta & NPT reach agreement on management, shareholder vote to seal it
20 December 2017: NPT accepts 25% cut to sell Christchurch property
6 December 2017: Augusta fund sells NZ Post building
15 October 2017: SkyCity buys AA Centre to consolidate precinct control
4 September 2017: Augusta shareholders get insight into workings of a fast-moving asset manager in an oft-pedestrian sector
28 August 2017: Cotterill sees opportunity for NPT as tenants quit
21 April 2017: 
Augusta wins fight for NPT
27 September 2016: 
Augusta buys 9% of NPT

Attribution: NPT meeting, releases.

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Augusta gets agreement to add 4th building to industrial fund

Augusta Capital Ltd said on Thursday it had successfully concluded negotiations on the final property to be included in the initial portfolio for the Augusta Industrial Fund.

Managing director Mark Francis said Augusta had entered into an unconditional agreement to acquire 20 Paisley Place, Mt Wellington, for $25,384,615 at a net initial yield of 6.50%. Settlement is scheduled for 31 May.

The property has a gross land area of 13,630m², net lettable area of 7877m² comprising 6221m² of warehouse, 1146m² of canopies & 508m² of offices.

It’s leased to Americold NZ Ltd, expiring on 30 November 2019. Icepak Ltd, a subsidiary of Hall’s Group Ltd, has agreed to lease the property on a new 12-year triple net lease from 1 December 2019. Hall’s Group has guaranteed the lease obligations.

Icepak is a storage & logistics business for primary producers & manufacturers specialising in dairy, horticulture, pet food, edible meats, fish, honey, pharmaceuticals, retail storage & distribution. It operates at 8 sites in Auckland, Waharoa (2 stores), Oringi, Wanganui, Longburn, Feilding & Christchurch.

The Hall’s Group operates a transport & logistics business primarily focused on refrigerated transport.

The other 3 properties in the industrial fund’s initial portfolio are Brick St, Henderson; 862 Great South Rd, Penrose; and The Hub, Seaview, Wellington.

The initial portfolio will have a weighted average lease term of 8.7 years, 100% occupancy, a diversified mix of 15 tenants, and a 60% weighting to the Auckland industrial market.

Mr Francis said Augusta would now seek to raise $75 million of equity for the fund, which would be fully underwritten. Augusta will underwrite $35 million and commit to hold a 10% stake in the fund for the long term.

The company expects to register a product disclosure statement for the fund just before or after Easter.

Attribution: Company release.

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Augusta delays industrial fund launch to get fourth property in

Augusta Capital Ltd said yesterday it had decided to delay the launch of its proposed new industrial property fund until after Easter.

Managing director Mark Francis said: “The decision to delay is a result of Augusta now expecting to finalise negotiations on a fourth property within the next week. If negotiations are successfully concluded, Augusta considers that property will further enhance the proposed initial portfolio for the fund. A further announcement will be made when negotiations are concluded.”

Mr Francis also said the tenant at the Brick St, Henderson, property had waived its right of first refusal and this property was confirmed as being included in the fund’s initial portfolio.

Earlier stories:
9 February 2018: Augusta gets one tick for new fund, one more to go
24 January 2018: Augusta wants syndicate approval to add third property to new industrial fund
29 December 2017: Augusta gets some remodelling for second industrial fund property
13 December 2017: Augusta buys Wellington property as seed for new industrial fund

Attribution: Company release.

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NPT sets meeting date on externalising management

NPT Ltd has called a meeting for Monday 19 March for shareholders to vote on a proposal to externalise management to Augusta Capital Ltd subsidiary Augusta Funds Management Ltd. The NPT board unanimously supports the proposal.

Augusta said that if NPT shareholders approve the transactions, it would settle acquisition of the management rights on 26 March and assume responsibility for the management of NPT from that date.

NPT Ltd, special meeting on externalising management to Augusta Funds Management Ltd, Monday 19 March at 2pm, Link Market Services Ltd, Deloitte Centre, 80 Queen St

Link: NPT notice of meeting

Earlier story:
9 February 2018: Augusta & NPT reach agreement on management, shareholder vote to seal it

Attribution: Company releases.

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Augusta to open Airways building syndicate at weekend

Augusta Capital Ltd has registered a product disclosure statement for its $22.75 million investment offer in a new single-asset fund to acquire & redevelop the Airways Corp Ltd premises in Christchurch.

Augusta expects the offer to open on Saturday and close on Friday 23 March. Settlement is expected to occur on Thursday 29 March.

Augusta will underwrite $15 million of the $22.75 million of equity, and a third party will underwrite the balance.

The building will house part of Airways’ new air traffic management platform. Airways is committing to a 25-year lease term on the new building & 2 of the existing buildings (effective from practical completion, which is expected to occur in mid-2019), and a 9-year lease term on the remaining building (starting at a date elected by Airways between 12 & 18 months after practical completion).

Augusta’s guarantee of the development agreement obligations will be released once the required equity & debt for the new fund are raised.

Attribution: Company release.

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Augusta & NPT reach agreement on management, shareholder vote to seal it

Augusta Capital Ltd said today it had entered into a binding agreement with NPT Ltd to acquire the rights to manage NPT on an exclusive basis.

It’s conditional on the approval of NPT shareholders at a meeting expected to be held in the second half of March. Augusta, which holds 18.85% of NPT, won’t be voting because it’s classified as a related party.

Mark Francis.

Augusta managing director Mark Francis said: “There has been no change to the key terms previously notified when the non-binding agreement was entered into. These include:

  • Augusta will pay $4.5 million to NPT to acquire the management
  • The management fees to be paid to Augusta under the management agreement include a base management fee of 0.5%/year on up to $500 million of assets under management and 0.4% on assets under management over $500 million, and
  • Property management, performance, leasing, acquisition & development management fees are also payable.

“Augusta expects the management agreement will initially increase Augusta’s recurring base management fee income by about $900,000 based on NPT’s current balance sheet. Augusta considers the remainder of the terms of the management agreement are best-in-class compared to similar management agreements. Importantly, Augusta’s interests are firmly aligned with NPT shareholders’ through its 18.85% shareholding.”

Mr Francis said Augusta had proposed – and NPT had accepted – a “yield plus growth” investment strategy for NPT, which Augusta believed would strongly differentiate NPT from other investment options in the listed property sector and suited the current low-yield environment.

“Augusta has a track record of identifying & adding value to assets. The strategy would see Augusta tasked with repositioning the existing portfolio of assets as well as identifying assets for acquisition which it believes have strong yield & growth opportunities.”

Cotterill adds an out

Bruce Cotterill.

NPT chair Bruce Cotterill said: “Substantial progress has been made since it was announced last year that an agreement in principle had been reached. Since then, the NPT board has worked through a robust process to evaluate the proposal and negotiate the detailed terms. The board is satisfied that the proposal is in the best interests of all NPT shareholders in the context of its current market position & preferred strategy.”

The independent directors of NPT commissioned KordaMentha to prepare an appraisal report, which concluded that the transaction was fair to all shareholders.

“The NPT board therefore intends to recommend that shareholders vote in favour of the resolution to proceed with the externalisation of management. Further detail regarding the basis for this recommendation will be set out in the notice of meeting.”

Mr Cotterill added one key term of the agreement that Mr Francis didn’t highlight: The management agreement may be discontinued after a minimum period of 5 years, under certain circumstances. Discontinuance would require shareholder approval & the payment of a fee calculated by an agreed formula, outlined in the management agreement.

Mr Cotterill added that the NPT board believed the key benefits to NPT of proceeding with the externalisation of management included:

  • immediate cost savings in corporate overheads
  • access to Augusta’s substantial resources & expertise across all of the key areas of property management – well beyond what NPT could reasonably afford itself based on its current size & market position
  • benefits associated with Augusta’s market breadth & depth, which is likely to result in access to more investment opportunities more quickly and therefore more rapid progress against the strategy & goals of the NPT board, and
  • demonstrated success in creating & applying growth strategies and a vested interest in the success of NPT as its current largest shareholder.

Attribution: Company releases.

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Augusta gets one tick for new fund, one more to go

Augusta Capital Ltd has satisfied one condition for the inclusion of a Henderson property in a new industrial property fund, but still requires the existing tenant to waive its first right of refusal.

The building at 12 Brick St, Henderson, is owned by a syndicate which Augusta manages, and the investors agreed last week to sell it to the new fund.

The other 2 properties in the new fund’s initial portfolio are 862 Great South Rd, Penrose, and The Hub, Wellington. Price tag on all 3 buildings is $86.31 million. Between them they have 14 tenants and a weighted average lease term of 7.2 years.

Augusta managing director Mark Francis expects the initial equity to be raised by the new fund will be between $58-60 million. Augusta will underwrite $33-35 million.

Mr Francis said work continued to finalise the product disclosure statement for the offer ahead of registration in mid-February.

Earlier stories:
24 January 2018: Augusta wants syndicate approval to add third property to new industrial fund
29 December 2017: Augusta gets some remodelling for second industrial fund property
13 December 2017: Augusta buys Wellington property as seed for new industrial fund

Attribution: Company release.

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