Archive | Augusta Capital

Augusta industrial fund closes oversubscribed

Augusta Capital Ltd confirmed yesterday that the Augusta Industrial Fund closed oversubscribed with $75 million raised.

Managing director Mark Francis said the acquisition of the initial properties in the portfolio was to be settled later in the day.

As part of the capital raising, Augusta Capital has subscribed for 7.5 million shares and intends to hold a 10% stake as a long-term investment.

Mr Francis said a limited number of investors were reinvesting their funds from other Augusta-managed properties which have sold and would settle in the next month. As a result, Augusta will hold a limited number of shares for the next 2 weeks and then transfer to those investors.

He also said Augusta had received a large number of applications at the close.

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

Together, that initial portfolio will have the following key features:

  • a weighted average lease term to expiry of 8.7 years
  • 100% occupancy
  • a diversified mix of 15 tenants, and
  • a 60% weighting to the Auckland industrial market.

Augusta will receive establishment & underwriting fees in connection with the offer as well as ongoing management fees consistent with the NPT Ltd management agreement, which Augusta entered in March.

Image above: 862 Great South Rd, Penrose, back on to Auckland’s Southern Motorway. The area marked in green will be redeveloped.

Earlier stories:
25 May 2018: Transformation hits Augusta bottom line, but confident company lifts dividend
1 May 2018: Augusta industrial fund set to open next week
27 March 2018: Augusta settles NPT management rights payment
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

Attribution: Company release.

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Transformation hits Augusta bottom line, but confident company lifts dividend

Augusta Capital Ltd continued its transformation in the year to March from being a direct property investor towards its aim of becoming New Zealand’s leading & most diversified property funds management specialist.

One impact was the 80% drop in revaluation gains to $799,000 ($4.12 million the previous year). Those gains are unrealised, but are a handy prop for company results as the market rises.

Key points from the financial year to March:

  • Total assets under management grew 10% ($168 million) to $1.85 billion – 99 properties
  • Total comprehensive income for the year, net of tax, fell 60% to $3.2 million ($8 million) due to lower investment property revaluation gains & the deferral of the Augusta Industrial Fund launch date
  • 14% reduction in adjusted funds from operations (non-GAAP measure) to $5.8 million, equating to 6.6c/share (7.7c/share).
  • Exit of 2 Finance Centre assets – 2 remaining properties settle on 1 April 2019
  • 3 new single-asset funds launched, raising $125 million of equity
  • 23% growth in recurring annualised base management fees, which are now $6.96 million
  • New funding structure executed, which is now aligned to the company’s future strategic direction
  • Net assets/share reduced to 96c (98c), primarily driven by the writedown in value of NPT shares
  • Basic & diluted earnings/share fell 60% to 3.67c (9.15c)
  • Increased stake in NPT to 18.85% and then secured the NPT management contract
  • Invested in specialist talent to support business growth & new fund initiatives
  • 4th quarter dividend of 1.5c/share, supported by the increase in recurring earnings.

Reflects transformation stage, says Duffy

Augusta chair Paul Duffy said the result reflected the nature of a business in the late stages of a significant transformation: “The total comprehensive income after-tax result is also symptomatic of the fact Augusta is progressively selling down all directly held properties from which the company’s revenues have historically been derived. The result should reflect the bottom of a transition cycle to establishing a more resilient earnings profile from a greater pool of Australasian-based property funds.

“The board believes this is a tipping point in terms of transitioning Augusta’s earnings. The volatility we’re seeing here has been well signalled previously, but the recurring annualised earnings continue to grow. 2 new funds have also been added to the managed portfolio, as well as 3 new single-asset vehicles.”

Managing director Mark Francis said the total comprehensive income after-tax & AFFO performance was impacted by the deferral of the Augusta Industrial Fund launch as a fourth asset was secured and more time was taken to allow for the capital raising. The income derived from establishing the fund will be recorded on settlement, expected to be 15 June.

“The prior year also reflected valuation gains at the Finance Centre based on the contracted sale terms, and the remaining assets are held at similar values this year net of transaction costs.

“The long-term growth fundamentals are encouraging. The resilience being built into Augusta’s earnings is critical to the future of the business.

“Encouragingly, we realised just over 10% growth in funds under management during the period under review. The pipeline has been created and we are actively pursuing a number of investment opportunities in the Australian market too.”

Rental income reduced due to the sale of Augusta House in July but this was offset by income derived from warehousing the Hub asset for the Augusta Industrial Fund.

Funds management

Mr Francis said: “The income benefits derived from the progress made this year will be realised in future income years. Momentum has continued with 2 new funds added to the managed portfolio, broadening our product offerings.

“Often in the funds management industry costs are incurred before the wealth is created for both the investor & manager. Corporate costs increased as we sought the necessary capability to grow & source new opportunities.”

Investment asset income of $1.77 million was realised from positions taken in the Augusta Value Add Fund No 1 Ltd (Value Add Fund) & NPT Ltd: “This income replaced the loss of rental income from the Finance Centre divestment. Income derived from capital investments & commitments was stronger in the 2018 financial year through active use of the balance sheet, at the same time maintaining capability to facilitate new deals.”

Balance sheet transformation

Augusta now has a new funding structure consisting of 3 facilities aligned to the new balance sheet – property, investment & funds management (working capital). It can also source further funding for warehousing of assets or underwriting of offers.

Following the divestment of the Finance Centre, capital will be released to grow the funds management business, and will include:

  • Acquisition or launch of new fund management initiatives
  • Warehoused assets – prior to the transfer to a managed fund
  • Underwriting capability in respect to new offerings or capital raises, and
  • The ability to invest in new products or investments which Augusta manages to create an alignment of interests.

Group gearing was 31.2% of gross asset value (26.6%).

Dividend

The board resolved today to pay a fourth quarter cash dividend of 1.5c/share, up from 1.375c in the December quarter. It’s fully imputed with credits of 0.583c/share attached. Dividends for the full year total 5.625c/share (5.5c/share in 2017). The dividend pay-out ratio was 85% (71%). The board expects the 2018-19 dividend to be 6c/share, up 9.1%.

Outlook

Mr Francis said earnings would reflect the strong start to the 2019 financial year, based on the current pipeline of opportunities: “The challenge remains in sourcing compelling product for our investors, but Augusta is as well placed as anyone to do this. Current market conditions remain buoyant, with deals continuing to be transacted at historically low yields.

Near-term strategic operating priorities include:

  • Settlement of the Augusta Industrial Fund on 15 June
  • Launch of the 96 St Georges Bay Rd offer, which will be a single asset vehicle
  • Launch of further investment funds, details to come
  • Identifying further capital sources & distribution channels
  • Further expansion into Australia, and
  • The sale of the final 2 assets of the Finance Centre transaction will be complete in April 2019, providing further balance sheet capability.

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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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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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 with 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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