Archive | Augusta Capital

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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Augusta goes unconditional on Airways redevelopment

Augusta Capital Ltd said on Wednesday all conditions for resyndication & redevelopment of Airways Corp of NZ Ltd’s Christchurch premises had been met and the development agreement was unconditional.

Augusta managing director Mark Francis said on 22 December the agreement provided for the development of a new “importance level 4” building which would house part of Airways’ new air traffic management platform. In return, Airways was committing to:

  • an extended 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 (which begins at a date elected by Airways between 12 & 18 months after practical completion).

The combination of those leases provides a weighted average lease term on practical completion of 21.83 years.

The agreement was conditional on receipt of a resource consent, approved funding terms & the approval of the investors in the existing syndicate which owns the property.

This week, Mr Francis said he expected a new single asset fund to be established by 29 March, to raise the required capital for the redevelopment. A product disclosure statement is being prepared, to raise $22.75 million of equity, of which Augusta would underwrite $15 million, with a third party to underwrite the balance.

“The debt & equity funds the purchase of the property from the existing scheme, establishment costs &an expected development spend of $19.23 million.”

Augusta’s guarantee of the development agreement obligations is released on establishment of the new single asset fund, subject to the required equity & debt being raised.

Earlier story:
29 December 2017: Augusta to resyndicate & add to Airways premises

Attribution: Company release.

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Augusta wants syndicate approval to add third property to new industrial fund

Augusta Capital Ltd said on Monday it had made a conditional offer to the investors in one of its syndicated properties for its new industrial fund to acquire that property. The offer is subject to an investor vote. If successful, this would be the third & final property in the initial portfolio for the launch of the new fund.

Augusta manages the syndicated property at 12 Brick St, Henderson, and portfolio & syndication management subsidiary Augusta Funds Management Ltd has sent a notice of meeting to the investors in that property requesting approval for a sale to the new fund.

Augusta managing director Mark Francis said: “It is a relatively new industrial property constructed in 2009, with a long-term lease of at least 10 years remaining to D&H Steel Construction Ltd – and potentially a further 5 years if the tenant does not exercise the break right it has at 10 years.”

Augusta has scheduled the investor vote for Friday next week, 2 February. The sale would be conditional on sufficient capital being raised under the public offering for the new fund and the existing tenant waiving its right of first refusal.

Mr Francis said if the sale is approved, the new fund will be launched with 3 properties in its initial portfolio – 862 Great South Rd, Penrose; The Hub, Wellington; & 12 Brick St.

That portfolio has a current valuation of $87.85 million, 14 tenants and a weighted average lease term of 7.2 years. Mr Francis expected occupancy to be 99% on settlement.

He expects the initial equity to be raised by the new fund to be between $58-60 million. As previously announced, Augusta will underwrite between $33-35 million of that equity raising and intends to subscribe for at least a 10% stake in the new fund and maintain that holding long-term.

Augusta is preparing a product disclosure statement for the fund, which it expects to be registered in mid-February. Settlement of the acquisition of the initial portfolio is intended to occur on 29 March.

Attribution: Company release.

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Augusta gets some remodelling for second industrial fund property

Augusta Capital Ltd confirmed its intention to establish an industrial property fund on 22 December, when it entered into an agreement for the new fund to unconditionally acquire the property at 862 Great South Rd, Penrose.

Augusta managing director Mark Francis said the fund would acquire the Penrose property for $19.05 million, with settlement set for 29 March.

The company settled the $44.9 million acquisition of its first fund asset, the Hub industrial property at Seaview in Wellington, on 20 December.

The 2.37ha Penrose property is fully occupied by Graphic Packaging International NZ Ltd (formerly known as Colorpak NZ Ltd), which will surrender the front portion of the property and enter into a new 8-year lease for the rear portion (from completion of certain works in the second half of 2018).

Graphic Packaging is ultimately owned by NYSE-listed Graphic Packaging Holding Co, which produces packaging for consumer products companies.

Mr Francis said the vendor (a private individual) was obliged under the sale & purchase agreement to complete a demolition of the front portion of the site. Once that’s done, the front portion presents various development options for the new industrial fund. The vendor has also agreed to underwrite $12 million of shares in the new fund (secured by a right to set off against the purchase price payable).

Mr Francis said the acquisition reinforced Augusta’s intention for the fund to be weighted towards the Auckland industrial market. He said Augusta was completing due diligence & negotiations on a further 2 Auckland properties.

Timing of the public offering for the new fund will be announced in the New Year.

Earlier stories:
20 December 2017: Augusta settles Hub purchase
13 December 2017: Augusta buys Wellington property as seed for new industrial fund

Attribution: Company release.

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Augusta to resyndicate & add to Airways premises

Augusta Capital Ltd has entered into a development agreement with Airways Corp of NZ Ltd and the existing Augusta-managed syndicate that owns Airways’ Christchurch premises.

Augusta managing director Mark Francis said on 22 December the agreement provided for the development of a new “importance level 4” building which will house part of Airways’ new air traffic management platform. In return, Airways is committing to:

  • an extended 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 (which begins at a date elected by Airways between 12 & 18 months after practical completion)

Mr Francis said the agreement was conditional on receipt of a resource consent, approved funding terms & the approval of the investors in the existing syndicate which owns the property. These conditions are due to be satisfied by 30 January.

To fund the landlord’s development obligations, Augusta Capital subsidiary Augusta Funds Management Ltd proposes to re-syndicate the property, giving existing investors a preferential right to invest in it.

Mr Francis said Augusta Capital would underwrite $15 million of the $22.75 million of equity proposed to be raised in the resyndication, and a third party would underwrite the balance.

In addition, Augusta Capital has guaranteed the existing syndicate’s obligations, which will be released once the new syndicate is established and the required equity & debt raised.

Augusta expects the new syndicate to be established by 29 March.

Attribution: Company release.

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Augusta settles Hub purchase

Augusta Capital Ltd has settled its $44.9 million acquisition of the Hub industrial property at Seaview in Wellington, which it wants to use as a seed asset for a new open-ended industrial fund.

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.

Managing director Mark Francis said today the company would release the timing for the initial public offering of the industrial fund in the New Year.

Mr Francis said last week the company was also investigating & undertaking due diligence on several Auckland industrial properties and expected to launch the industrial fund 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.

Earlier story:
13 December 2017: Augusta buys Wellington property as seed for new industrial fund

Attribution: Company release.

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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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