Archive | Syndication

Pod hotel the opportunity for Augusta to close value-add fund with strong return and open tourism fund

NZX-listed property fund manager Augusta Capital Ltd will achieve 2 aims simultaneously when it leases the building at 54 Cook St, on the fringe of the Auckland cbd, to Jucy Snooze Ltd for a pod hotel.

That transaction, which has several conditional components, will:

  • finalise the sale by Augusta Value Add Fund No 1 Ltd of its 5th & last asset, resulting in closure of the fund & distribution of remaining funds, and
  • enable Augusta Capital subsidiary Augusta Funds Management Ltd to launch a new open-ended tourism fund.

Managing director Mark Francis talked about a tourism fund as one of several openings for new investment when he addressed Augusta’s annual meeting in July, and in the company’s annual report.

But first, the purchase of 54 Cook St will enable the value-add fund to close with an 11.5% pretax internal rate of return to investors after 2½ years, and a return of $900,000-1 million to Augusta Funds Management as a performance fee.

Northington to advise on transaction

The $16.5 million + gst Cook St sale is conditional on the value-add fund’s shareholders approving the transaction by 20 October, as it’s considered a related-party transaction. The fund company has engaged Northington Partners Ltd to provide independent advice on the proposed sale.

The transaction is also conditional on Augusta Funds Management obtaining a satisfactory cost estimate from its quantity surveyor by 26 October. If the sale proceeds, settlement is expected to occur on 31 October.

Augusta established the value-add fund in April 2016 to acquire a portfolio of 5 properties, which were identified as having value-add opportunities through either redevelopment or repositioning. The objective of the fund was to sell the properties after the value-adding improvements had been implemented, and to return the net proceeds from the property sales to investors in the fund.

Augusta has signed a conditional agreement to lease 54 Cook St to Jucy Snooze Ltd for 20 years, with fixed annual increases of 2.0% & market rent review every 10 years, and 2 7-year rights of renewal.

The lease agreement is conditional on resource consent, building consents and the cost estimate for the landlord’s works being no more than $14.5 million.

Jucy chief executive Tim Alpe (right) & his brother, Jucy Group chief operating officer Dan Alpe, sitting in a hotel pod.

Jucy chief executive Tim Alpe said on Thursday the 4-storey 388-bed hotel would be capable of accommodating over 466 visitors/night in a mixture of pod-style accommodation & ensuite rooms, as well as Jucy Group’s head office. The building, which used to house 1ZB’s radio studios, is one block up Nelson St from the southern edge of SkyCity Entertainment Group Ltd’s international convention centre.

Mr Francis said Augusta Funds Management intended to initially acquire & hold the asset on its balance sheet and then use it as a seed asset for a new open-ended tourism fund: “The new fund is consistent with Augusta’s core strategy to broaden & diversify our funds management offerings to appeal to a wider range of investors. At this stage, Augusta expects the Tourism Fund’s initial offering to be opened in the first quarter of 2019.”

Earlier stories:
21 September 2018: Jucy to open big pod hotel up street from new convention centre
30 July 2018: Augusta expands its portfolio platform, a different way of managing & seeing property investment

Attribution: Augusta release.

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Property Managers Group offers 2 wholesale opportunities, gets AA ratings for 2 retail funds

Published 5 September 2018
Property Managers Group (PMG) launched investment opportunities on Monday in 2 of its wholesale investment portfolios – PMG Capital Fund Ltd & the PMG Direct Childcare Fund.

The childcare fund is offering wholesale investors 5.5 million units at $1/unit, targeting a strong gross cash distribution return of 6.5%/year (net of expenses but before tax) for the full financial year to 31 March 2019, with a minimum investment of $100,000. Chief executive Scott McKenzie said the fund was targeting a 10% internal rate of return for the year.

PMG is also offering wholesale investors up to 12 million shares at $1/share in PMG Capital and is targeting a minimum gross distribution return (net of expenses but before tax) of 10%/year. The minimum investment parcel is $250,000.

The childcare fund builds fit-for-purpose early childhood learning centres in strategic & growing New Zealand areas, based on analysis of demographic data. This issue is to raise the funds to develop 2 new properties, in Hamilton & Pukekohe, taking the total number of centres in the fund to 5.

PMG Capital is PMG’s private equity real estate fund. It acquires real estate and facilitates its transfer into one of the group’s investment funds after either adding value, underwriting, or as a short-term buy/sell transaction.

Mr McKenzie said PMG Capital was suited to experienced & sophisticated investors seeking a higher return and who are comfortable with a slightly higher risk profile & irregular distributions.

AA ratings

These offers are not available to retail investors or investors outside New Zealand. PMG has taken them to the market days after NZX-owned FundSource issued AA ratings for 2 of its retail investment funds, Pacific Property Fund Ltd & PMG Direct Office Fund, as well as a positive analysis of both funds by Northington Partners. Mr McKenzie said the 2 funds were the first unlisted fund & property manager in the country to achieve these ratings.

Mr McKenzie commented: “These accolades prove we are doing the right thing to look after investors’ interests and are a nod to the scale, professionalism & strong performance of our business & investment portfolios.

“Over the past 2 years we have worked hard to deliver on investors’ requests for more diversification within existing funds as well as provide investors access to higher possible rates of return & exposure to growing areas in the commercial property investment sector.

“The launch of PMG Capital & PMG Direct Childcare Fund 18 months ago, and the current offers open, do just that.”

Links:
Property Managers Group
PMG Capital
PMG Direct Childcare Fund
Statistics NZ, 19 December 2017: More toddlers in formal early childhood care

Attribution: PMG release.

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Haven fund managers looking positively at rental housing opportunities

Kerry Hitchcock has been involved in both residential & commercial property from different aspects for about 30 years – from agency through to apartment development and, highly relevant for his next venture, management once those developments were completed.

The investment memorandum for the “invest-to-rent” fund, by Haven Funds Management Ltd, is due out shortly and will be aimed at wholesale investors to begin establishing a $500 million residential portfolio.

The “rent” part of that catchcry is to rent out, but Mr Hitchcock says the tenants need their esteem raised too.

Kerry Hitchcock.

“We’re saying this is a new market,” Mr Hitchcock said in a wide-ranging interview. “We can meet it by better product better suited for the tenants. The millennials now are not all rushing to buy homes. They are looking at alternative lifestyles. We’re looking at the under-50s & 60s now.”

He looks at it from 4 angles:

  • First, tenants need a better deal – longer tenure in particular
  • Second, the need for far more homes in Auckland presents an investment opportunity
  • Third, drawing in large wholesale investors initially can ensure a successful operation away from less certain bank funding, and
  • Fourth, the proposal presents ongoing opportunities in funds management & property management.

The development opportunity

Mr Hitchcock sees the spread of transport networks around Auckland as an opening to focus new residential development around rail & bus hubs, relating closely to tenants’ needs for close access to shops, amenities such as childcare, and quick access to jobs.

That’s the opposite of the way much of Auckland has sprawled in recent decades. Dominated by cars rather than public transport, the region’s suburbs have had hubs of sorts, with a long walk home from most of them. Jobs are likely to be far further afield, and access by public transport may be patchy.

His previous ventures include the Barclay Apartments, across Albert St from the Auckland District Court a decade ago, the Forte apartments & an associated parking development on Symonds St, the Oxford apartments on Mount St, various roles through the Charta group since 1997, a land investment in the Tamaki area, and the Hitchcock Realty Brokers agency in Newmarket, set up with his father, Doug Hitchcock, in 1990.

His partner through many of those ventures, Mark O’Connell, is sticking with the Charta business they set up a decade ago, which specialises in property & funds management and also has a real estate agency.

For this new venture, former Colliers agent Tim Lichtenstein has joined him as investor & chief executive, Mr Hitchcock will be an executive director, and a third director, Paul Manning, will join the company as an investor & in a non-executive role.

Mr Hitchcock has degrees in accounting & law and sits as an independent director on several boards including Tamaki Regeneration Co Ltd, Smales Farm’s business & technology hub and Haumaru Auckland Ltd, the housing joint venture between the Selwyn Foundation & Auckland Council.

Mr Lichtenstein has 14 years’ experience in investment sales, at Colliers over the last 9 years, raising over $400 million of equity funds for clients over the last 6 years.

The third partner, Paul Manning, is one of New Zealand’s most prominent advertising industry leaders, who’s directed major agencies including Ogilvy & Mather and Clemenger Group’s 99. He launched his first start-up at 22, which went on to become New Zealand’s largest privately held advertising agency, and was an EY Young Entrepreneur of the Year winner.

Mr Hitchcock said: “Paul has an outstanding depth of expertise in marketing, advertising, brand development, strategic planning, design, media, digital & e-commerce. He is a proven leader with a track record of success, consulting to many of the country’s top private, public & government organisations, across all major categories.”

Haven Living based on US & UK models

Mr Hitchcock said in a release in August: “The fund, called Haven Living, is the first of its kind in New Zealand, based on a model that has worked successfully overseas, particularly in the UK & US. Haven intends to disrupt New Zealand’s cottage industry of private rental operators to improve living options for Kiwis who choose to rent.”

Statistics tell us home ownership in New Zealand has reached a 60-year low – down from figures above 70% for decades, falling in the last decade to about 62%. Mr Hitchcock adds to the disheartening picture (for those who don’t own): “House price inflation has been around 30% over the last 5 years in New Zealand – and a whopping 65% in Auckland – while incomes have risen by only 15% on average nationwide.

“This is causing more & more Kiwis to choose renting over homeownership, yet dissatisfaction of rental options is on the rise. It has become clear New Zealand’s housing system is failing too many people. Haven Living believes its invest-to-rent fund can be part of the solution.

“Invest-to-rent will become an important part of New Zealand’s housing supply equation. We cannot expect the Government alone to solve the country’s housing problems. The solution will be a combination of initiatives, which includes support from the private sector. About a third of New Zealanders rent, and we plan to vastly improve their conditions & living options.”

Changes needed to address lack of quality & tenant rights

Tim Lichtenstein.

In the August release, Mr Lichtenstein said over 98% of New Zealand’s rental properties were owned & let by private landlords: “Whilst some stock is well managed, many are poorly maintained, older properties with significant inconsistencies in tenancy conditions & tenure. This is exacerbated as demand outstrips supply of quality rental accommodation, particularly in Auckland, Wellington & Christchurch.

“Private rental housing tends to be of poorer quality, and the tenure of such housing is more fragile than home ownership. In the absence of any regulatory enforcement, and as demand has outstripped supply, there have been few incentives for landlords to maintain or improve the quality of their rental houses, which on average are of poorer quality than owner-occupied homes.

“The social & economic costs of these below-average housing conditions, with insecure tenure, are well documented. In the current market there are few incentives for landlords to have fixed-term tenancy agreements longer than 12 months. This leaves most tenants with little security of tenure and no effective protection against frequent 6-monthly rent increases.

“Despite significant challenges, we are seeing a strong customer demand shift toward renting in New Zealand. This is driven by a number of factors, in particular housing affordability. But for a growing number of people, renting is simply a lifestyle choice.”

Mr Hitchcock takes up the story, and the plan to make hundreds of new homes available: “Invest-to-rent housing is likely to feature prominently in our future housing landscape, regardless of what is achieved in building more social housing and in extending home ownership options for first-time home buyers.

“Haven Living aims to shake up the private rental market, onboarding hundreds of new, high quality, well located properties over the next 5 years. The fund’s managers have a pipeline of development contracts across the country and will be continually acquiring more stock through deals with builders & developers.

“With Haven Living, we’re taking a customer-centred approach. If you stop to think about how the term ‘landlord’ originates from English common law and denotes a dominant/subservient relationship between parties, you realise it’s terribly old-fashioned. Our point of view is that people occupying our properties are not ‘tenants’, they are customers, and we are not landlords, we are service providers.”

Innovations Mr Hitchcock wants to see, to improve living options for customers, include scrapping bonds & letting fees altogether, and providing greater security through multi-year leases with flexible exit options should the customer’s circumstances change.

“Every home comes with free broadband for the entire lease term, and its own AI assistant, making it easy for customers to order maintenance & supplementary services, such as cleaning, from Haven.

“The cost of renting a Haven home will be relative to market rents, and rents will be consistent, with reviews occurring no more frequently than 12-month intervals.”

Mr Hitchcock said Haven expected to bring hundreds of new homes to the market, all to the latest standards & specifications: “Developing an invest-to-rent fund in New Zealand will deliver thousands of new rental homes and give people who rent access to more housing choice.”

Focus on customer needs

“It’s that customer focus: we value you. We’re looking at services onsite, proper maintenance, facilities management, staff, there’s a range of things: childcare, long-term tenancies & tenure.

“Families need to be secure. They can put themselves under a lot of pressure without buying homes.

The security for families, the old idea, you build equity over time. If we can meet the family needs over the long term rather than just the short term, we can do a lot for families.

“Many landlords are small investors. It’s a wonderful way to build equity. But if you come at this from the customer end, you look at how you met those needs for the long term.

“Of course you need the quality of tenant. I think if you offer quality property, match tenants appropriately with the kind of property you have, you can work with this. You need disciplines. What I think you create: they end up with a much greater sense of ownership if they know they’re secure & long-term living.”

Residential portfolios a rising investment sector

Residential portfolios have become popular investments in Europe, attracting investors such as the Brisbane-based Cromwell Property Group into German housing, and numerous Scandinavian investors buying in Germany in particular, but also elsewhere in Europe.

Mr Hitchcock said the sector was well established & soaring in popularity internationally: “The residential market now represents 25% of all institutional property investments in the US, making it the second largest investor allocation after offices and well above investment in retail centres & industrial estates. Local wholesale investors are now examining the opportunity to invest at scale in this highly secure asset class.

“Like other international markets, we expect this new sector to be very popular with New Zealand-based wholesale & institutional investors, while providing positive social impact.”

Haven’s wholesale investor clients will include family offices, private & institutional investors.

NZ rental market expected to keep growing

Mr Hitchcock said analysis of the New Zealand rental market’s key drivers, coupled with the outlook for household growth over the next 5 years, indicated that steady growth in the sector would continue: “In fact, research suggests some one million households will live in rented residential accommodation by the end of 2030, up from around 581,000 rented households in New Zealand today.”

In this very different frame, demand for quality stock was outstripping supply and the fragmented cottage industry dominated by individual investors & family trusts would no longer be adequate

“New tax policies & regulatory requirements to improve standards are now beginning to affect private landlords and weighing on the number & type of private investors active in the market.

“A widening shortfall in availability of quality properties, particularly in the country’s main metropolitan areas, is now placing significant pressure on rental supply. These factors have created an unprecedented opportunity for wholesale investors to enter the market.”

Scale brings an opportunity to build communities

“A strong link exists between quality of accommodation & quality of health, employment & education, demonstrating significant social benefits of a contemporary, co-ordinated housing scheme. Providing quality, well located & well managed homes with fair, secure tenancies will contribute to the overall liveability of our cities.”

But the fund won’t be a developer itself: “We have a network of developers we can deal with, we’re confident we can buy at a discount that will make it reasonably attractive to us, and the developers we work with can also make an acceptable margin.”

Overseas growth demonstrates the opportunities

Mr Hitchcock highlighted strong growth in residential investment in the UK, as existing landlords face tougher restrictions: “The UK Government has put severe restrictions on private investors in the rental market. They’re removing the deduction of interest through borrowed money around that entirely by 2020 unless you’re a corporate investor.

“Knight Frank research shows a massive explosion of investment. It will triple in the next 3-4 years.

I think the new investors are adding to the market, and it’s probably a shift in the private investor market.

“If you take away the advantages, private landlords will always be there but it’s making it harder. In New Zealand, we already had mooted the capital gains tax & the 5-year brightline test. There’s not a lot of steps away from full capital gains tax. This government is talking that you can’t deduct interest that will put you into a loss. The UK’s removing deduction altogether, I believe.”

On the investor side, he said: “We’ve also had a gap between yield on residential & commercial. You are seeing yields down to 5%s, but typically yields rise after interest rates go up. If you take the internal rate of return, I think they are quite comparable. Initially the cash might not be. There is a much lower risk in residential, and you don’t have these large capital maintenance or expenditures with large complexes.”

As for the kind of investment, Mr Hitchcock said: “We’ve got a hierarchy of risk where house & land is probably at the low end of risk. Terraces then, and city fringe.

“Anything that is 4-5 levels has a whole different cost structure than a standalone house. The rental return on a 4-5000/m² suburban fringe 4-5 level block has to be double a standalone that’s effectively owner-occupied.”

Mr Hitchcock said changes to the transport network changed the parameters: “I’ve been looking in this area for years and it hasn’t worked, but now we’ve got, at last, a transport start. They build and there’s less dependency on the car if you pick these key hub points.

We’ve always found the south has been a very robust rental market because of the huge jobs hub, and the airport. People want to live near work, shopping, recreation. And if you can remove cars from property that soak up space, so much the better.”

Banking restrictions opened way for non-bank funding rise

Mr Lichtenstein has 14 years’ experience in investment sales, at Colliers over the last 9 years, raising over $400 million of equity funds for clients over the last 6 years.

He was Colliers’ syndications national director for 4 years, capital advisory director for 17 months. Previously, he’d spent 5 years in property development & project management on high-end spec housing. That followed 9 years operating Design Design Ltd, an importing business with multiple retail sites & associated wholesale distribution.

At Colliers, Mr Lichtenstein said the opportunity to lift investment in specialist funds arose because “New Zealand banks have been operating in a regulatory environment which in recent times has led to restricted lending parameters. While this has brought some challenges, it has also created opportunities for non-bank funding like the capital raised through Colliers’ capital sourcing service”.

His role at the agency was to source capital from client investors and match it to projects & opportunities, either in the form of debt or equity: “It’s essentially an alternative to bank funding. We’re effectively providing a peer-to-peer lending solution for commercial property projects.”

He said it proved a great solution for both investors & developers: “Investors with capital will have the opportunity to see deals on our books before they are put to the wider market, giving them first mover advantage. Developers will get access to capital without necessarily being constrained by the banks’ more restrictive lending environment. It’s a much more flexible funding model that allows projects to move ahead much more quickly.”

Attribution: Company release, interview.

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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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