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.
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
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.