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.
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”
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.”
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.