Property For Industry Ltd announced its acquisition of a 9-property Transport Investments Ltd portfolio on Wednesday for $69.5 million, matched by a rights issue to raise $70 million of new equity.
The portfolio comprises 8 industrial properties & one head office. 7 are leased to the Transport Investments Ltd Group, one of New Zealand’s largest private domestic freight & logistics businesses. The 2 additional properties are leased to NZ Post Ltd, Aviagen NZ Ltd & Rockgas Ltd.
Image above: The 2-year-old Transport Investments depot at Wiri.
PFI will initially fund the acquisition via an extension of its banking facilities, using the proceeds of the rights offer to repay debt & provide balance sheet capacity to fund further portfolio activity. To this end, it’s established a $70 million institutional credit facility with ANZ Bank NZ Ltd, ranking alongside PFI’s existing facilities & expiring on 31 January 2019.
The 1:10 pro rata renounceable rights offer has an exercise price of $1.54/new share and is fully underwritten by Forsyth Barr Group Ltd. The issue price represents a 7.1% discount to the theoretical ex-rights price of $1.658.
Rights trading will open next Wednesday, 11 October, and close on Thursday 26 October. Trading in the new shares will open on Tuesday 7 November.
PFI expects the acquisition & equity raising to reduce pro forma gearing from 34.2% to 32.3%. The company has maintained its guidance for distributable profit of between 7.7-7.9c/share & a cash dividend of 7.45c/share for the 2017 financial year.
The portfolio has a weighted average lease term of 13.9 years, 100% occupancy & a passing yield of 7.22%.
A key feature for PFI is that the portfolio has low overall site coverage, averaging 25% across the 9 sites, providing medium to long-term development potential.
PFI general manager Simon Woodhams said the portfolio would increase the company’s overall weighted average lease term from 4.8 years to 5.4 years: “The lease agreements with Transport Investments are on attractive terms, with initial 15-year terms & fixed rent reviews of 4.55% every 2 years.
Settlement of the acquisition is scheduled for 31 October.
Wiri, 63 McLaughlins Rd: net lettable area 7123m², site area 23,976m², site coverage 29.7%, rent $1.15 million, tenant TIL Group
Napier, 39 Edmundson St: net lettable area 2449m², site area 12,140m², site coverage 20.2%, rent $220,000, tenant TIL Group
New Plymouth, 330 Devon St East: net lettable area 482m², site area 1051m², site coverage 45.9%, rent $112,000, tenant TIL Group
New Plymouth, 2 Smart Rd: net lettable area 2342m², site area 6121m², site coverage 38.3%, rent $275,000, tenant NZ Post, Rockgas
New Plymouth, 20 Constance St: net lettable area 1432m², site area 3312m², site coverage 43.2%, rent $387,000, tenant Aviagen
New Plymouth, 28 Paraite Rd: net lettable area 12,521m², site area 40,324m², site coverage 31.1%, rent $1.195 million, tenant TIL Group
Blenheim, 11 Sheffield St: net lettable area 4823m², site area 20,724m², site coverage 23.3%, rent $490,000, tenant TIL Group
Nelson, 15 Artillery Place: net lettable area 2907m², site area 22,343m², site coverage 13%, rent $540,000, tenant TIL Group
Christchurch, 41 & 55 Foremans Rd: net lettable area 4584m², site area 24,907m², site coverage 18.4%, rent $670,000, tenant TIL Group
Total: net lettable area 38,663m², site area 154,898m², site coverage 25.0%, rent $5.039 million.
Transport Investments activity
Transport Investments is the parent company for a number of transport & logistics businesses including Hooker Pacific, TNL, Roadstar, Pacific Fuel Haul Ltd and 2 acquired this year, NZL Group Ltd & Move Logistics Ltd.
In Auckland, Transport Investments moved in October 2015 from 2 facilities at Airport Oaks & Onehunga to its purpose-built Wiri facility on McLaughlins Rd, a 7.4km hop to Auckland Airport.
Transport Investments said in March it had been looking at some strategic areas to move into to strengthen its overall business and one was third-party logistics, where the logistics provider takes responsibility for management of particular supply chain requirements for the client: “This can include warehousing, order taking & filling, inventory management, labour supply, fleet management &other activities, as well as the physical distribution aspect.”
The immediate outcome was to buy Move Logistics Ltd, intending it to operate as an autonomous entity within the group, starting 31 May.
In July, Transport Investments said freight & logistics company NZL Group Ltd, which it acquired in June, would move its Mt Maunganui operations to a $20 million purpose-built facility at the Tauriko Business Estate, 10km from the port, between state highway 29 over the Kaimais to the Waikato and the highway 36 bypass to Rotorua.
The Mt Maunganui site’s owner, businessman & former MP Bob Clarkson, will develop the new Tauriko facility. NZL has signed a 15-year lease with rights of renewals.
9 July 2017: NZL to move Mt Maunganui operations to Tauriko
Attribution: PFI release & offer documents, Transport Investments website.