Archive | Syndication

Augusta expands its portfolio platform, a different way of managing & seeing property investment

Augusta Capital Ltd talks of new directions in its annual report, and managing director Mark Francis (pictured) gave some details on that approach when he spoke at the company’s annual meeting in Auckland last week.

One is for the parent company to take a stake of 7.5-10% in funds it establishes. Most syndicators of the past aimed for a complete selldown.

A second is to lift its working capital to support the launch of new initiatives, including funding property deposits & initial fund establishment costs. It’s already done this, and has both backed its investments by taking up a share of underwriting and used its resources to secure investments without having to rely on the subsequent selldown.

A third is the intention to list funds, such as its industrial property fund. That’s a feature of creating a portfolio platform – syndicates (which are distinctly different from the buy-&-hold investments of the past; these ones increasingly have potential for additional development or other remodelling and are likely to be sold before the syndication term is up), investments in other listed entities, the first of those being Asset Plus Ltd (the former NPT Ltd), the new listed funds, new ventures into tourism & residential, and portfolios for wholesale & institutional investors.

And a fourth is to take its approach to Australia, where its investments so far have been in Queensland.

Guy French-Wright, who was development manager for a Melbourne-based wholesale property fund manager, Quintessential Equity, before coming to Auckland for 18 months as Augusta’s chief operating officer, is returning to Melbourne with a role, in Augusta chief executive Mark Francis’s words, “of being our eyes & ears to invest throughout Australia”.

Mr French-Wright worked in Melbourne for 15 years before his Auckland stint, including 5 years with Salta Properties leading commercial development and another 5 years at Mirvac as commercial development director.

66% jump in directors’ fees explained

At the annual meeting, shareholders approved a 66% increase in the pool for directors’ fees, from $334,000 to $553,000/year, with only a 2.45% vote against. Company chair Paul Duffy said the fees had been stable since 2014 and commented that, after he joined the board in 2015, “it’s not wise to come on and immediately increase the fees”.

Mr Duffy said the fees set now were “market or slightly under. I give you a commitment that we won’t increase fees for 2 years”.

That said, he also made a couple of points about the listed property sector and the search for suitable directors. In a comparison with much of the listed property sector, he commented that “we’re not just a rent collector, we’re a fund manager” and returned to the topic later, saying the typical approach was for “the management to deliver basically a fait accompli, and look what happens. That’s what happened to Fletcher Challenge [in its new guise as Fletcher Building Ltd, where the board didn’t have the backgrounds or expertise to see through what was being presented to it].”

After proposing this fee increase, Mr Duffy said he’d discussed it with the Shareholders Association, corporate investors & some smaller shareholders.

“We’re not a normal property company. We’re not just a rent collector, we’re a fund manager. We’re probably more suited to the investment category (on the NZX), and the directors’ role is much more than I had at DNZ (now Stride).”

Mr Duffy said Augusta, now almost completely out of direct property investment (its final payment from sale of the Finance Centre in Auckland is scheduled for next year), managed over 60 syndicates & funds. Parent company directors played a role in every one, especially on due diligence – and Augusta has turned syndication from the buy-&-hold model to the buy-improve-&-trade model.

Mr Duffy said getting the right remuneration was important in attracting the right board candidates. At the lower board fees of the last 4 years, “I wasn’t getting the right traction, the right people,” he said.

Directors also get fees for conducting due diligence – a maximum $10,000, mostly $5000. Mr Duffy said he’s given the Shareholders Association a commitment that he’d monitor those fees.

Renamed NPT part of a growing platform

Listed company NPT Ltd, renamed Asset Plus Ltd, in which Augusta holds an 18.85% stake, has become part of Augusta’s portfolio platform, alongside its industrial property fund, which it would also like to list in due course.

Augusta managing director Mark Francis said Asset Plus was “essentially a debt-free company holding 3 assets” – the Eastgate shopping centre in Christchurch, Heinz Wattie national distribution centre in Hastings and 22 Stoddard Rd shopping centre in Mt Roskill, Auckland – and its first investment under Augusta management needed to be “a good one, the right one”.

Another Augusta fund, the Value Add Fund No 1, was created in 2016 for wholesale investors. It’s sold 4 of its 5 properties, leaving what is now called Hangar 54, at the corner of Cook & Nelson Sts in Auckland, looking for tenants following asbestos removal.

The fund has returned 72.75% of its equity to shareholders and is debt-free, and Augusta is discussing Hangar 54’s sale with a buyer.

“We intended an internal return on assets of 11-14%,” Mr Francis said. “It was set up as a 5-year fund and will be rounded out after 3 years.”

Links:
Augusta Capital
Asset Plus

Attribution: Augusta annual meeting, annual report, website.

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Augusta registers St Georges Bay Rd syndication offer

Augusta Capital Ltd has registered the product disclosure statement for its offering of $68.5 million of equity in a new single asset fund which will acquire 96 St Georges Bay Rd, at the foot of Parnell.

Augusta managing director Mark Francis said today the company expected the offer to open on Wednesday 18 July, once the Financial Markets Authority’s waiting period has ended, and close on Tuesday 18 September. Settlement is now expected to occur on Friday 28 September.

The $68.5 million to be raised is fully underwritten. Augusta Capital has underwritten $24.5 million and third parties the balance. Augusta will receive underwriting & offeror fees under the offer, as well as an ongoing management fee once the single asset fund is established.

96 St Georges Bay Rd is a brand-new 5-level A grade office building developed by Mansons TCLM Ltd. The fund will acquire the 11,083m² building for $116 million. On a 10.89-year weighted average lease expiry, the initial yield would be 6.47%.

Mansons has signed up Xero Ltd for 2 floors, and Independent Liquor (NZ) Ltd & Harrison Grierson Group Ltd for one floor each. A small amount of level 1 & the ground-floor retail, which have no tenant signed, will be leased by Mansons for a 9-year term

A copy of the product disclosure statement is available on the Disclose register at https://disclose-register.companiesoffice.govt.nz/ by searching “Augusta St Georges Bay Road Property Trust” under “search offers”.

Earlier story:
6 May 2018: Augusta single-asset fund to buy new Mansons Parnell building

Attribution: Company release.

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Oyster settles Central Park buy, Goodman also completes Glassworks sales

A joint venture led by property fund manager Oyster Property Group Ltd settled its $209 million purchase of the Central Park Corporate Centre at Ellerslie from the Goodman Property Trust on Friday.

Central Park fronts Great South Rd beside the Southern Motorway at the Ellerslie-Panmure roundabout in Auckland.

Earlier in the week, Goodman settled sales of a development for Steel & Tube Holdings Ltd & development land at the Glassworks Industry Park in Christchurch.

Earlier stories:
1 June 2018: Oyster goes unconditional on Central Park purchase
29 May 2018: Goodman upbeat as it forges ahead with repositioning
17 November 2017: One condition left on Central Park sale, and Air NZ extends at Fanshawe St
10 November 2017: Big property sale follows first-half profit setback for Goodman
2 October 2016: Goodman signs Highbrook & Glassworks developments

Attribution: Goodman release.

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Oyster goes unconditional on Central Park purchase

The Goodman Property Trust’s $209 million sale of the Central Park Corporate Centre to a joint venture led by property fund manager Oyster Property Group Ltd has gone unconditional.

The trust’s manager, Goodman (NZ) Ltd, announced the sale last November, when one condition remained – Overseas Investment Office approval. Oyster is 50% owned by the ASX-listed Cromwell Property Group.

Settlement is scheduled for 29 June.

Goodman (NZ) chief executive John Dakin said in November the sale represented a significant milestone in the repositioning of the Goodman trust, marking the last of its major identified asset sales.

The property fronts Great South Rd beside the Southern Motorway at the Ellerslie-Panmure roundabout in Auckland.

Earlier stories:
17 November 2017: One condition left on Central Park sale, and Air NZ extends at Fanshawe St
10 November 2017: Big property sale follows first-half profit setback for Goodman

Attribution: Company release.

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Augusta single-asset fund to buy new Mansons Parnell building

An Augusta single-asset fund will syndicate ownership of a new office building which Mansons TCLM Ltd is 2 months from completing at 96 St Georges Bay Rd, at the foot of Parnell.

Augusta Capital Ltd said on Friday its subsidiary, Augusta Funds Management Ltd, had entered into an unconditional agreement to acquire the 5-level A grade office building. Under the agreement, an Augusta fund will ultimately acquire the 11,083m² property for $116 million, which represents a 6.47% initial yield based on a 10.89-year weighted average lease expiry.

Mansons expects to reach practical completion in July and has signed up Xero Ltd for 2 floors, and Independent Liquor (NZ) Ltd & Harrison Grierson Group Ltd for one floor each. A small amount of level 1 & the ground-floor retail, which have no tenant signed, will be leased by Mansons for a 9-year term.

Augusta Funds Management intends to raise the required $68.5 million of investor equity in $50,000 units through the new fund before the forecast 30 August settlement date, subject to practical completion having occurred. Augusta Capital will underwrite $24.5 million of the equity-raising and will also receive offeror fees. The balance has been underwritten by third parties.

Augusta expects to open the offer at the end of June.

Attribution: Company release.

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Maat settles Tauranga purchase after successful syndication

Maat Property Group Ltd settled the $41.4 million purchase of a new Tauranga office building on 27 April following its successful syndication.

The 5-storey 7800m² building plus basement at 306 Cameron Rd, in the Tauranga cbd, was completed in late 2016 by Manor Group Investments Ltd in a joint venture with Watts Group Investments Ltd. Maat launched its syndication in March, offering 457 share parcels of $50,000 for a total equity ratio of 55%. It’s projected a pretax cash return of 7.8%/year, paid monthly.

Bayleys Tauranga was involved in leasing 94% of the building and handled its sale.

Attribution: Agency release, Maat & Manor.

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Augusta industrial fund set to open next week

Augusta Capital Ltd subsidiary Augusta Industrial Fund Ltd has registered the product disclosure statement for its $75 million equity-raising to acquire its first 4 industrial properties.

The initial portfolio is valued at $118 million, putting the debt ratio at 36.4%. Augusta Capital, the NZX-listed promoter, intends to take at least a 10% stake.

Augusta has assumed a 6.5% gross return (before depreciation & tax) will be paid. That’s supported by the forecast operating earnings and represents a payout ratio of 95-100%.

Managing director Mark Francis said today the offer was expected to open next Tuesday, 8 May, once the Financial Markets Authority’s waiting period has expired, and close on Monday 11 June. Settlement is scheduled for Friday 15 June. Oversubscriptions won’t be accepted.

Augusta Capital has underwritten $35 million of the $75 million to be raised and third parties have underwritten the balance.

The initial portfolio consists of 12 Brick St, Henderson; 862 Great South Rd, Penrose; 20 Paisley Place, Mt Wellington; and The Hub, Seaview, Wellington.

The product disclosure statement says Augusta Industrial intends to grow the asset base to about $250 million over the next 2-3 years and maintain a gearing target of 35-40%. Once that asset level has been reached, Augusta intends to apply to list the fund on the NZX main board.

A second equity raise of $90 million has been assumed on 1 April 2019, along with $52.425 million of debt drawn to facilitate the purchase of $135 million of additional property & associated costs.

Initial portfolio features:

  • A weighted average lease expiry 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 receive establishment & underwriting fees, and ongoing management fees consistent with its new NPT Ltd management agreement.

Link: The product disclosure statement can be opened on the Disclose register at https://disclose-register.companiesoffice.govt.nz/ by searching “Augusta Industrial Fund” under “search offers”.

Earlier stories:
12 March 2018: Augusta gets agreement to add 4th building to industrial fund
2 March 2018: Augusta delays industrial fund launch to get fourth property in
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, product disclosure statement.

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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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Oyster fund gets AA FundSource rating

NZX Ltd-owned research & rating agency FundSource Ltd has given Oyster Property Group Ltd’s Direct Property Fund an AA rating – the first for an unlisted direct property fund in New Zealand.

Mark Schiele.

Oyster chief executive Mark Schiele said yesterday: “This puts the Oyster Direct Property Fund in the top 5% of 64 funds currently rated by the research house. We view this as solid independent confirmation of the fund’s structure & performance. It should be very helpful for investors when assessing their investment options.”

Oyster launched the unlisted PIE-structured unit trust in 2016 to hold a diversified commercial property investment portfolio, giving investors an affordable way of investing in the commercial property market.

Mr Schiele said the fund had a value of about $40 million after doubling in size in the last 18 months.

“The fund provides investors with diversified exposure to about $500 million in quality commercial property throughout New Zealand, monthly cash distributions or the ability to reinvest, and the potential for capital growth.”

The minimum investment into the fund is $10,000. Since it was launched, it’s paid investors a distribution equivalent to 7c/unit/year. The initial unit price was $1.00 and at 31 January it was $1.037.

Links:
Oyster Group
FundSource report

Attribution: Company release.

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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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