Archive | Augusta Capital

Augusta buys Wellington property as seed for new industrial fund

Augusta Capital Ltd has unconditionally bought an industrial property in Wellington as a seed asset for a new open-ended industrial fund.

Augusta managing director Mark Francis said on Monday the company had bought the Hub industrial park in Seaview for $44.9 million. It covers 4.06ha at 17 & 25 Toop St, 101-103 & 109-117 Port Rd, Seaview, and has a net lettable area of 32,600m² of warehouse & office. Tenants include Peter Baker Transport, Toll Logistics, Downer, Fujitsu & Jets Transport and the weighted average lease term is 5.7 years.

Recent seismic strengthening was completed to lift all buildings above 70% of new building standard. The purchase price of $44.9 million reflects a 7.46% passing yield following completion of those works.

Settlement date is next Wednesday, 20 December.

Mr Francis said Augusta would fund the acquisition by a mixture of cash reserves & bank debt from ASB.

He said the company was also investigating & undertaking due diligence on several Auckland industrial properties and expected to launch the industrial fund in the New Year with a mixture of Auckland & Wellington stock, but with a weighting towards Auckland.

Augusta expects the fund to initially raise between $50-70 million of equity. Augusta will underwrite $35 million of that and is working with a consortium of high-net-worth private investors to underwrite the balance.

It will be Augusta’s first open-ended unlisted multi-asset fund (as compared to the closed-end Value Add Fund & single-asset funds): “The establishment is consistent with the previously identified strategy to broaden our funds management offerings to appeal to a wider range of investors and to give existing investors more choice, in addition to our typical offerings of single asset syndications. It will also assist in providing further recurring management fee income at a meaningful level.”

Augusta expects the fund’s initial offering to be open by the start of February, with settlement at the end of March.

Attribution: Company release.

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Augusta & NPT reach broad agreement on portfolio management

Augusta Capital Ltd has entered into a non-binding agreement with NPT Ltd to manage NPT’s property portfolio.

The non-binding portfolio management agreement, announced yesterday, is subject to due diligence by both parties, negotiation of the terms of the management agreement and the approval of NPT shareholders.

The portfolio is a thin one. NPT has agreed to sell to SkyCity Entertainment Group Ltd its interest in the AA Centre, which runs from Albert St to SkyCity’s front door on Federal St in downtown Auckland. Settlement is scheduled for next July.

The listed property investor has 4 other assets – the Heinz Wattie national distribution centre in Hastings, the Eastgate mall & Print Place in Christchurch, and the 22 Stoddard Rd shopping centre in Mt Roskill, Auckland.

NPT shareholders voted in April to hand the company’s management contract to Augusta, defeating a proposal for Kiwi Property Group Ltd to take over. Augusta lifted its NPT stake to 18.85% before the meeting, and won the vote with the support of associates.

This time round, Augusta won’t be allowed to vote because it’s a related party. Approval will be by an ordinary resolution, requiring over 50% support.

Under the proposal, Augusta will pay NPT $4.5 million to buy the management rights.

Bruce Cotterill.

NPT chair Bruce Cotterill said other key terms included:

  • The agreement will be for no less than 5 years (unless terminated by either party for cause) and thereafter will continue until NPT exercises its right to discontinue, which would require a resolution of shareholders, and
  • The fees charged under the management agreement will be in line with sector benchmarks.

Mr Cotterill commented: “Importantly, the NPT board considers that the proposed investment strategy outlined by Augusta is closely aligned with its views on the preferred way forward for NPT.

“We anticipate the process to move from agreement in principle to finalised documents that can be put before shareholders for consideration could take about 6-10 weeks, although the Christmas period may interrupt that process.”

Francis says agreement “best in class”

Mark Francis.

Augusta managing director Mark Francis said Augusta “considers that the remaining key terms, including management fees & termination rights, are best in class compared to other external management agreements in the New Zealand listed property sector”.

He said the 2 companies would work towards agreeing the full terms of the management agreement so NPT can call the shareholder meeting as quickly as possible.

Mr Francis believed externalising management would be accretive to NPT’s earnings: “Augusta has proposed a ‘yield plus growth’ investment strategy for NPT, which Augusta believes will strongly differentiate NPT from other investment options in the listed property sector and suits 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.

“If approved, the externalisation would increase Augusta’s recurring management fee income by about $900,000/year, based on NPT’s current balance sheet. Further details will be available once a binding agreement is entered into and a notice of meeting issued by NPT to its shareholders.”

Links: NPT
Augusta Capital

Earlier stories:
15 October 2017: SkyCity buys AA Centre to consolidate precinct control
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 & Augusta releases.

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Augusta shareholders get insight into workings of a fast-moving asset manager in an oft-pedestrian sector

Augusta Capital Ltd’s annual meeting last Thursday was an opportunity for investors to gain an insight into a changing world.

The company’s annual results, out in May, showed an entity determined to shift completely out of long-term passive direct investment and into a range of portfolio management roles. It now has a $1.7 billion portfolio of syndicates & other funds under its wing, including privately held portfolios and the Value-Add Fund No 1, which is not about the traditional yield-based returns on property but about repositioning assets and making a profit.

Mark Francis.

Managing director Mark Francis said the company had limited opportunities for growth in its remaining direct property portfolio without substantial new capital being introduced, and market conditions favoured diversifying.

He listed these alternatives, which he saw offering much better returns:

  • Realising further opportunities to manage funds
  • Launching additional funds with the potential to expand & diversify these types of offerings into niche & strongly performing sectors of the economy
  • Ongoing, measured expansion into Australia
  • Maintaining prudent capital management structures throughout
  • Balance sheet transformation
  • Working closely with Bayleys Real Estate to maintain optimal efficiency across the existing asset portfolio, and
  • Active management.

Here & there he would throw in a corporate catchphrase, realise it and revert to blunter language. Augusta is about making properties work – and if they don’t work, can’t be improved further, don’t offer redevelopment opportunities, are syndicates at the end of their time, the company will move on.

While the company’s refashioning ownership away from long-term passive, it’s also been adjusting its balance sheet to cater for different ownership forms (syndicates closing earlier than they used to, funds with other imperatives, development) and for volatile cash holdings.

The issue of volatility was sorted out at the annual meeting when the constitution was changed with a 99.74% vote in favour of removing the loan:value ratio clause that had impeded some investments.

Recurring fees are the cement

Augusta chair Paul Duffy said the focus of the last year, growing recurring management fee income, remained the focus and would be driven through new syndicates & a range of multi-asset property funds. The company would also invest in new staff, technology & processes to further that aim.

“Recurring annualised base management fees increased 10% in the last financial year. This trend has continued in the new financial year with the completion of the 33 Broadway Offer at the end of June and our latest Australian syndication, which will settle this coming Monday.

“In the last financial year, we raised over $200 million in equity for the establishment of new syndications. This included the 2 largest-ever syndications completed by Augusta – the NZME & BDO buildings at Graham St, Auckland. Outside of the KiwiSaver sector, there are very few entities across the financial sector which will have raised similar amounts of equity.

“The success of those capital raisings has seen the number of investors in our syndicates & funds grow 20% in the past year. Augusta now has over 3000 investors in its syndicates and 880 shareholders in Augusta Capital.”

The sale of remaining Finance Centre properties will be completed in 2018 & 2019, and Augusta will use the released funds to warehouse property before syndication, underwriting & co-investments in new funds. However, Mr Duffy said it was proving harder to source these opportunities.

The earnings

Augusta increased adjusted funds from operations by 19% to $6.75 million, equating to operating earnings/share of 7.7c (6.5c in 2016). Net profit after tax fell 43% to $7.75 million, the result of lower revaluation & disposal gains as directly held investment portfolio assets continued to be divested.

However, as those directly held gains fell, the company increased funds under management by 9.5% to $1.6 billion at balance date – and to $1.7 billion since then, following settlement of the 33 Broadway and Nudgee Rd, Brisbane, properties.

Augusta raised $203 million in new equity through 5 new syndications, lifting assets under management by $347 million and continuing the expansion into Australia. Recurring annualised base management fees rose 10% to $5.6 million at balance date, and have since risen to $5.8 million following settlement of 33 Broadway at the end of June and Brisbane syndicate property Nudgee Rd, settling today. Net asset value/share has risen from 94c in March 2016 to 98c.

He said Augusta, which carries buildings on its balance sheet at cost, would launch more funds this financial year, including “measured expansion” into Australia.

All those funds were about yield, but the Value-Add Fund No 1, is about total return, repositioning assets for capital gain for the investors in the fund, including Augusta itself.

Of the 5 properties bought for that fund, all in Auckland, 3 have been sold:

  • 100 Carbine Rd, Mt Wellington, unconditionally sold for $36.8 million (purchase price $33.45 million)
  • 11 McDonald St, Morningside, sold for $24 million (purchase price $17 million), and
  • 36 Kitchener St in the cbd, sold for $21 million (purchase price was $16.5 million).

Mr Francis said the company was working on options for the other Value-Add Fund properties, Hangar 54 at 54 Cook St and 151 Victoria St West.

Next task is to transform balance sheet

Next up for Augusta is to transform its balance sheet. In short, this is about moving out of direct property ownership – albeit investments such as the company’s stake in the value-add fund and short-term underwrites amount to a form of direct investment – and into portfolio management for other investors. It’s contract management for a spread of entities, expanding the external management concept which listed property entities have switched in & out of over the last 3 decades.

Mr Francis said Augusta was getting better use of its capital through that contract management than it would have by sticking to direct investment. That change led to the 19% increase in adjusted funds from operations, he said.

Instead of being “a listed property company”, Mr Francis said: “We’re a pure-play funds management initiative. We’re getting a better earn – 31% – off funds management than we were off direct property investment.”

The change in focus reduced group gearing from 35.5% a year ago to 26.6% in December and 21% now, but Mr Francis said shareholders could expect that ratio to be volatile, depending on the state of investments: “Given what we’ve got on the radar, you wouldn’t expect us to sit at those gearing levels [in the 20-25% range] very long.”

Shareholders approved amending the company’s constitution, by removing the loan:value ratio limit, with a 99.74% vote in favour of this change. The result, Mr Francis said, was that against a target gearing ratio of 35%, the actual gearing could range from 0-55% on a drawn basis.

Future borrowings will consist of 3 categories, each with its own target gearing levels:

  • Real property: A gearing ratio of about 45%, with interest serviced by the income from the relevant real properties; this category includes properties warehoused short-term, with an exit strategy
  • Investment assets (shares or co-investments in managed funds): A lower gearing ratio, with interest serviced by the distribution or dividend income from such assets, and
  • A separate working capital facility, which will be serviced by the cashflows generated from the funds management business and only used to facilitate new deals or funds initiatives.

“The key focus will be servicing the debt, as the debt profile will be low on a long-term average basis, but may increase with respect to new initiatives.”

Mr Francis said that before the constitutional change, “you will see where we’ve bought property to syndicate and underwritten ourselves, but sometimes we’ve hit a debt barrier.”

Changes for syndicate investors

Syndicate investors will see changes too, as Augusta rationalises the portfolios it manages. It’s prepared to be active in closing a syndicate, including offering investors in some of the provincial syndicates the opportunity to enter a new syndicate with better growth prospects.

Mr Francis said Augusta had put proposals to investors to sell out of syndicates and had sold $150 million of such assets in the last 12 months.

“We believe we’re exiting them at the right time, and we can get better investment outcomes. This is a win-win in our minds. We’ve certainly had strong support from investors for our exploring this avenue, and we still see plenty of opportunity for divestment.”

The NZ portfolio

Augusta’s NZ audited portfolio delivered a weighted average total return of 16% for the year to March, an unrealised average 25% equity gain since establishment and a 4.8% valuation gain in the last year. That $1 billion portfolio excludes Australian audited properties, new schemes, the directly owned portfolio, the Value-Add Fund and privately owned & other properties.

The portfolio is about two-thirds exposed to Auckland and is across all commercial sectors. Mr Francis commented: “If you believe the data, it’s hard to ignore Auckland as the preferred investment location.”

How Augusta goes about buying, and building on what it buys

Company chair Paul Duffy & director Bryce Barnett added some detail on how Augusta goes about syndication purchases.

Mr Duffy said there would be an informal discussion with the board about a proposal – at that morning’s board meeting there 3 of these – and, if an agreement to buy was prepared, the board would have a due diligence committee look at the tenants: “It’s not a passive investment. The returns we achieve, close to 16% – it’s a very active management to achieve those results.”

As Augusta looks more at Australia, and Brisbane in particular, Mr Bryce spoke up as the expert in that market segment. KCL Property Ltd, which he headed, merged with Augusta in 2014, taking $850 million of assets under management into the enlarged group, including a number of syndicated Brisbane assets.

“The Australian opportunities at the moment with the best upside are in the Brisbane region,” Mr Barnett said.

One shareholder was curious to know if Augusta improved a property during its brief ownership before passing it on to a syndicate. “Not as a rule,” Mr Francis said. “We’ll buy something then pass it on. Sometimes that will be in passive form, sometimes it will need working on. But we’re not buying, putting a bow on it and then passing it on.

“For the Value-Add Fund, all 5 properties required some sort of addition. The real opportunity there was the short lease to Bunnings and no opportunity to renew it.”

Mr Duffy added: “At McDonald St, management initiated a plan change. We were able to increase the density of that building. We then found the risk to develop it was too high and we’ve now realised it at a substantial profit.”

Future for syndication

On a question of syndication becoming more difficult if interest rates rise, Mr Duffy said: “We’re trying to tie our bank finance to the lease period with interest rate swaps & so forth, and the team lock in a chunk of bank finance. That’s why the recurring earnings become a driver.”

Mr Duffy also said Augusta had hired accountancy firm PWC to provide treasury expertise.

He also commented on likely investment in commercial property by New Zealanders, especially the impact of KiwiSaver on the flow of capital: “With KiwiSaver, you’re going to have 10-15% weighted in property. New Zealand has seen foreign capital coming into commercial real estate, so I don’t see commercial property yields going to 6.5-8% in the next 3-4 years. It’s just not possible.”

Loughlin defers retirement

John Loughlin, who’d intended to retire at this annual meeting, will stay on until the end of the year, when a replacement is expected to be named. Mr Duffy said the search for a new director was progressing but wasn’t quite complete.

And Mr Francis complimented Mr Loughlin, who joined the board in 2007, saying they’d had “many robust discussions over the years” and had disagreed as many times as they’d agreed – “and that’s what you want from a director”.

Attribution: Annual meeting.

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Cotterill sees opportunity for NPT as tenants quit

Image above: The AA Centre on the corner of Albert & Victoria Sts in downtown Auckland, between the bungy jumps of the Royal International site & Sky Tower, and with works underway at the corner for the city rail link tunnel & station.

Listed property investor NPT Ltd has tenants leaving 2 of its 5 properties – one of them quitting 6 office floors – and the new board sees opportunity.

Bruce Cotterill.

New chair Bruce Cotterill was dying to tell shareholders about impending investment activity at the annual meeting in Auckland on Friday, but didn’t quite have everything in place to make the revelations.

“While we aren’t in a position to provide any detail at this time, we are working on a number of initiatives that we expect will deliver better returns to our shareholders and would set us on a clear path to growth. Although it is early days in our tenure as directors, this board has made rapid progress and shareholders may expect an update in the coming weeks as some of our initiatives come to fruition,” he said.

NPT has had a chequered history since its inception as the National Property Trust in 1994, but one thing about it hasn’t changed: it started small and has remained so, getting its portfolio over $200 million in value for a while but now down at $174 million.

Its change in prospects began last September when Augusta Capital Ltd bought 9.26% of its shares from the Accident Compensation Corp, then proceeded to make an offer for its management contract. In October, Augusta said it also wanted NPT to buy a portfolio of 3 unidentified properties valued at $329 million, and it wanted to help NPT grow its portfolio to improve returns.

This latter was odd, because Augusta had whittled down its own portfolio in favour of managing syndicates. NPT’s board baulked, and so began a struggle for control that cost NPT $2 million.

The loser, at a special shareholder meeting in April, was Kiwi Property Group Ltd, which also wanted NPT to buy properties – 2 assets valued at $230 million, the Majestic Centre in Wellington & North City Centre at Porirua, now on the market through an expressions of interest process.

Augusta won the fight for control after lifting its holding to 18.85% and the total  vote against Kiwi’s proposal was 54.85%.

Mr Cotterill was installed as independent chair; a recently appointed member of the old board, Carol Campbell, remained as an independent (and had her position confirmed at Friday’s meeting); and Augusta’s new chair, Paul Duffy, and another independent, Allen Bollard, were elected.

AA moving to Sale St

Mr Cotterill told shareholders AA Insurance had recently informed the company it intended to relocate to a new office building under construction by Mansons on Sale St in February 2018, although its lease on its 6 floors in the AA Centre – right above the Aotea station being constructed beneath its Albert-Victoria St windows – runs until June 2019.

Said Mr Cotterill: “This departure will provide us with a further opportunity for refurbishment & repositioning of the building in the Auckland City office leasing market. Leasing inquiry for the floors that are to become vacant is very strong and we expect to be able to lease them relatively quickly.”

He said NPT had been working on leasing the AA space for a couple of months: “We don’t have signatures on paper but we do have good inquiry.”

Print Place – repositioning or disposal?

In Christchurch, NPT’s property at 17 Print Place, Middleton, recently lost one of its 3 tenants and will lose another in December. On this, Mr Cotterill told shareholders the vacancy & shortening weighted average lease term had resulted in the value of the property easing. But again Mr Cotterill saw opportunity: “This vacancy may provide us with an opportunity to reposition the property.”

Mr Duffy said it was over-rented and had too much office space relative to its warehousing.

One shareholder questioned the board about NPT being an absentee landlord, but Mr Cotterill responded: “We agree with you, and we’ve appointed Colliers [as manager of its Christchurch properties]. They haven’t got any tenants yet because we only agreed to appoint them this morning.”

Mr Cotterill agreed with another shareholder that selling Print Place was also an option. He said the new board had 2 strategies to focus on – growing the portfolio, and repositioning what it already owned.

He cautioned that growth wouldn’t be easy: “We’re trying to rebuild when prices are at their peak. That’s not the easiest thing to do.”

He said the board recognised that “mum & dad” shareholders relied heavily on dividends and the board intended to maintain dividends at their present level. On Friday afternoon the board announced a 0.9c/share first-quarter cash dividend, carrying 0.1544c/share of imputation credits, and gave full-year guidance that total dividends would be at least the same as last year, 3.6c/share.

Again, Mr Cotterill presented the optimistic outlook: “This represents a conservative approach to 2018 financial year distributable profit while the board considers a number of options before it for NPT’s future direction. A further update can be expected on the board’s plans for NPT in the coming weeks.”

At the moment, NPT’s management remains internal – Kiwi’s proposal to buy it was defeated in April and Augusta’s proposal wasn’t put to that meeting, but Mr Cotterill said the outcome of the April meeting had raised interest in taking over the contract. One party had turned its talks into a proposal and the board was discussing the possibility with another: “There’s nothing concrete,” he said.

Earlier stories:
2 June 2017: NPT profit eaten up in battle over its future
26 April 2017: Cotterill takes chair at NPT
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: Annual meeting.

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Augusta sale on Carbine Rd among 8 Bayleys deals

Augusta Capital Ltd has sold a large syndicated Carbine Rd industrial property in Mt Wellington (pictured) through Bayleys. The agency has also sold 5 East Tamaki properties and 2 more in Takanini & Wiri.

Isthmus east

Mt Wellington

100 Carbine Rd:
Features: 4.48ha site, 29,526m² of buildings – 1970s warehouse, 7-10m stud height, extension added in 2005 providing 9-11m-high clearspan warehousing, separate 2-level air-conditioned office building & large staff cafeteria at the front plus yard areas; currently used as a distribution centre by Bunnings Warehouse, which will be vacating in March
Outcome: sold for $36.8 million to owner-occupier on behalf of Augusta Value-Add Fund No1 Ltd, with vacant possession
Agents: Mike Houlker, Sunil Bhana, James Valintine, James Hill & Scott Campbell

South

East Tamaki

2 Harris Rd:
Features: 3248m² corner site, 1516m² extensively refurbished & reconfigured commercial building, 52 parking spaces; Bayleys Real Estate is the anchor tenant on a 12-year lease from October 2016, insurance broker AON NZ has a 6-year lease on 478m² of office space
Rent: $501,600/year net + gst
Outcome: sold for $7.6 million at a 6.6% yield
Agents: Tony Chaudhary, Janak Darji, Chris Bayley & Stuart Bode

22 Harris Rd, units 2B & 2C:
Features: 2 adjoining industrial units of 441m² & 274m², tenant in occupation for 16 years
Rent: $66,000/year net + gst
Outcome: sold for $1.2 million at a 5.5% yield
Agents: Nelson Raines (Bayleys) & David Turner (Commercial Realty)

44 Crooks Rd, unit B:
Features: 622m² modern industrial unit – 332m² 8m-high, open span warehouse,  144m² ground-floor showroom, 114m² first-floor offices, 13 parking spaces
Outcome: sold vacant for $1.7 million
Agents: Katie Wu, Roy Rudolph & John Bolton

37 Greenmount Drive, unit C7:
Features: 109m² tilt-stab industrial unit – 81m² high stud warehouse & amenities, 28m² mezzanine floor, full height roller door access
Outcome: sold vacant for $330,000
Agents: Roy Rudolph & Katie Wu

11 Andromeda Crescent, unit 4B:
Features: 88m² industrial unit, food grade fitout including chiller
Outcome: sold vacant for $285,000
Agent: Nelson Raines

Takinini

26 Inlet Rd:
Features: 2707m² industrial site
Outcome: sold for $1.7 million at $628/m²
Agent: Nick Bayley

Wiri

18 Joval Place, unit F:
Features: 240m² industrial unit, mid-stud, clearspan warehouse in a busy cul-de-sac
Outcome: sold vacant for $676,000
Agent: Karl Price

Attribution: Agency release.

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Augusta confirms first sale in Finance Centre package settled

Augusta Capital confirmed settlement of its $30 million sale of Augusta House on Victoria St in the Auckland cbd to Heng Yue Ltd (David (Duoyu) Bei) today.

Augusta managing director Mark Francis said the company would apply $26 million towards debt repayment.

The settlement dates for Augusta’s sale of its remaining 3 properties in the former Finance Centre in Auckland haven’t changed. They are: Podium retail 1 April 2018, Finance Centre podium & Finance Centre carpark 1 April 2019.

Augusta signed its $96 million sale package a year ago and collected a $3 million deposit on Augusta House from Heng Yue, which also paid the additional 10% deposits due last month.

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:
12 July 2017: Augusta House sale settlement date confirmed

Attribution: Company release.

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4 commercial sales at Rosedale and in Bay of Plenty

Colliers agents have sold a Rosedale office & storage unit and 3 Bay of Plenty properties, 2 of them at auction.

North-east

Rosedale

59 Apollo Drive, unit I3:
Features: air-conditioned 355.5m² unit – office 313.5m², storage 42m² with roller-door access, deck 38m², 14 parking spaces
Outcome: sold for $1.425 million
Agent: Nick Recordon

South of the Bombays – Bay of Plenty

Mt Maunganui

24 Aerodrome Rd:
Features: 4396m² industrial development site, vacant 520m² building        
Outcome: sold for $2.5 million + gst
Agents: Rob Shoeser & Simon Clark

33 Newton St:
Features: 2310m² site running between Newton St and the rail tracks beside  Maunganui Rd, 5-unit 1520m² industrial, office & warehouse complex, fully leased, zoned commercial, which would allow more retail & office uses
Rent: $152,225/year net + gst
Outcome: sold at auction on 14 July for $2.6 million at a 5.85% yield
Agents: Simon Clark, Rob Shoeser & Duncan Woodhouse

Tauranga

44 Fourth Avenue:
Features: 445m² car yard, 78m² building just off Cameron Rd, 5-year lease
Rent: $42,000/year net + gst       
Outcome: sold at auction on 14 July for $750,000 at a 5.6% yield
Agents: Simon Clark, Duncan Woodhouse & Rob Schoeser

Attribution: Agency release.

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Augusta House sale settlement date confirmed

Augusta Capital Ltd confirmed on Monday that it had completed the subdivision of its Finance Centre property in Auckland and new titles had been issued for its 4 parts – Augusta House, the podium retail, the Finance Centre podium and the Finance Centre carpark).

The company therefore confirmed 24 July as settlement date for the $30 million sale of Augusta House to Heng Yue Ltd (David (Duoyu) Bei). The settlement dates for the remaining 3 properties haven’t changed and are: Podium retail 1 April 2018, Finance Centre podium & Finance Centre carpark 1 April 2019.

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

Augusta signed its $96 million sale package a year ago and collected a $3 million deposit on Augusta House from Heng Yue, which also paid the additional 10% deposits due last month.

Augusta managing director Mark Francis said: “While the delay in finalising the subdivision of the Finance Centre has been frustrating, Augusta has continued to receive all rent during this period and the settlement dates of the remaining 3 titles have not been affected.

“The proceeds will be applied towards debt repayment, with $10 million towards core debt and $17 million toward the facility drawn down for the underwrite of the 33 Broadway syndicate. As a result of this debt repayment, balance sheet capacity for future initiatives is increased.”

Earlier stories:
5 July 2017: Augusta closes Mercury HQ syndication 34% short, underwrites balance
25 July 2016: Finance Centre sale confirms Augusta’s full focus on funds management

Attribution: Company release.

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Augusta closes Mercury HQ syndication 34% short, underwrites balance

Augusta Funds Management Ltd closed its $83.5 million syndication of Mercury Energy Ltd’s new headquarters in Newmarket 34% short on Friday, but subscribed for the balance itself and expects to reduce the shortfall to 26% by the end of July.

Augusta is funding its own underwrite with an ASB Bank debt facility.

Managing director Mark Francis said the $83.5 million target for the 33 Broadway, Newmarket, syndication was Augusta’s largest capital-raising and drew $61.8 million of applications.

Of that total:

  • Applicants for $55.15 million had completed all anti-money laundering requirements before the closing
  • Applications for a further $2.4 million were complete but funds hadn’t been received by Friday. Mr Francis said Augusta would transfer units to these investors on Monday, immediately reducing the underwrite by $2.4 million
  • A further $4.25 million of applications were from investors who either needed to complete final anti-money laundering requirements or didn’t have funds available until July. Mr Francis said Augusta would subscribe for these units and transfer as funds became available.

Accordingly, Mr Francis said, Augusta subscribed on Friday for $28.35 million of units funded by the debt facility, reducing this to $25.95 million on Monday and anticipating a reduction to no more than $21.7 million by the end of July.

“Those units remain available for sale and inquiry remains strong,” he said.

Earlier stories:
28 March 2017: Augusta unconditional as second tenant signed for Broadway development
20 February 2017: Augusta launches Mercury syndication
22 December 2016:  Augusta takes new step in syndication

Attribution: Company release.

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Augusta’s bottomline slides on valuation, but funds management improves outlook

The move from being a struggling direct owner of property to becoming a dominant force in the management of property funds is starting to work for Augusta Capital Ltd, which had double-digit returns from fund operations and base management fees in the year to March.

But it ended its biggest transition year with a sharp drop in the bottomline return – net comprehensive income down 42.7% to $7.75 million ($13.52 million last year).

Net revenue was up 10.5% to $19.1 million ($17.1 million), but corporate costs were up 13.7% to $8.14 million ($7.16 million). The company made a smaller gain in the unrealised value of investment properties, $4.12 million ($7.07 million).

Unlike most of the listed property sector, Augusta has become less of a property owner & manager of its own portfolio (though the $93 million divestment of the Finance Centre isn’t scheduled for completion until 2019), more a syndication manager. And it’s also starting to find other areas of funds management to move into.

Highlights included:

  • 19% growth in adjusted funds from operations (a non-GAAP measure) to $6.75 million, equating to operating earnings of 7.7c/share (6.5c/share the previous year)
  • Recurring fees from funds management now a substantial growth component in overall earnings
  • Gross management fees up 37% to $7.26 million
  • 10% growth in recurring annualised base management fees, now at $5.6 million
  • Total assets under management up 9.5% to $1.6 billion – set to become $1.7 billion following settlement of 33 Broadway offering on 30 June
  • 5 new syndications completed, raising $203 million in new equity to realise $347 million in new deal asset values, and continuing expansion into Australia
  • Net profit after tax down 43% to $7.75 million, a decrease of 43% – related to lower revaluation & disposal gains as the company continued to divest directly held investment portfolio assets, and
  • A 4c increase in net asset value/share, from 94c to 98c.

Augusta Capital chair Paul Duffy said yesterday the result gave the market a clear picture of how the company’s balance sheet & future earnings profile were being transformed: “This has been a good year. It’s a strong result where management continued to deliver to a very high standard against a clearly defined growth strategy. The main takeaway is the strong growth in adjusted funds from operations, being driven by the emerging performance of Augusta’s growing funds management business.”

Managing director Mark Francis said the fall in net profit after tax was an anticipated consequence of actively transforming the balance sheet to fund the growth of new funds management initiatives: “By moving away from a traditional, directly owned investment model to a less capital-intensive growth model, we are delivering a more diverse & recurring earnings profile, which will better protect & help grow future value for our shareholders.”

Augusta earned $660,000 of investment asset income from positions taken in the Augusta Value Add Fund No 1 Ltd & NPT Ltd: “This is a new source of income that will continue to be an important feature of future earnings as we grow our total funds under management.”

The Value Add Fund investment was revalued upward by $780,000 (13%) on the original investment of $6 million. Augusta paid above the trade price for the later part of its investment in NPT, and recorded a $2.18 million writedown.

Augusta’s board expects to transform its balance sheet with greater investment in funds management initiatives, but said the company would retain the necessary capability & flexibility to create & take advantage of new opportunities.

Following divestment of the Finance Centre, Augusta will release capital to grow the funds management business, including:

  • Warehoused assets – pipeline for new product
  • Underwriting capability in respect to new offers, and
  • The ability to invest in new products or investments which are managed by Augusta to create an alignment of interests.

Near-term strategic operating priorities include:

  • Completing proposals to secure the NPT management contract and thereafter options to turn around its current under-performing assets
  • Successfully concluding the 33 Broadway offer (due to settle on 30 June 2017), the settlement of Augusta House and the launch of new investment products that will further diversify offerings
  • Ongoing measured expansion in Australia
  • Maintaining stringent capital management disciplines
  • Maintaining optimal efficiency across how we manage our existing management portfolio.

Augusta paid an overall 5.375c/share in dividends – 5c/share until the company lost its PIE (portfolio investment entity) status, and then, from 1 July 2016, at an annualised distribution rate of 5.5c/share. The board expects dividends to be maintained at 5.5c/share for the 2018 financial year.

Link:
Augusta financial reports

Attribution: Company release, annual report.

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