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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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Jucy to open big pod hotel up street from new convention centre

Jucy Snooze Ltd said yesterday it would open a 386-bed pod hotel in central Auckland by the end of next year. Owners Chris & Tim Alpe also operate the Jucy rental car business.

Image above: Jucy’s pod rooms, already operating in Queenstown & Christchurch.

Chief executive Tim Alpe said the 4-storey hotel on the corner of Cook & Nelson Sts would be capable of accommodating over 466 visitors/night. It would have a mixture of pod-style accommodation & ensuite rooms and, unlike other hotels in the chain, will also be designed for a specific business niche market.

He expected would meet about 4% of the estimated 3000-room shortfall in accommodation in Auckland when it opens.

While the hotel is primarily designed to meet the needs of budget international tourists, Mr Alpe also expects to see a number of conference delegates visiting from overseas, as well as long-term commuters from around New Zealand who may come to the city for work 2 or 3 days/week regularly.

“The main target market for Jucy Snooze Auckland will be millennial budget tourists who may travel by themselves, as a couple or part of a larger group. Typically they make a base in Auckland for a few days before leaving to tour the rest of the country.

“The new pod hotel will have a number of flexible work spaces able to accommodate longer-term business travellers. As part of the accommodation package the pod hotel will provide office facilities to this market.”

The hotel will be a short step from the Skycity International Convention Centre under construction between Hobson & Nelson Sts. Mr Alpe said it would offer a low-cost room alternative for international business travellers attending conferences as well.

Hybrid of accommodation & flexible workspace

The pod hotel for which Jucy is seeking consent at the corner of Cook & Nelson Sts, in the Auckland cbd.

Mr Alpe said the concept of a hybrid between accommodation & flexible working space had started to appear overseas and he believed it would work in New Zealand: “We see potential demand from out-of-town businesses such as startups, who need to come to Auckland regularly but can’t justify the cost of establishing a permanent office here.”

“The new Jucy Snooze Auckland will provide a cost-effective way to do this and, at the same time, offer networking opportunities for guests when they utilise the shared space with other like-minded companies – including the relocated head office of Jucy itself.”

Mr Alpe said the Auckland hotel would have new design elements adapted from learnings in Jucy’s Christchurch & Queenstown hotels: “The Auckland cbd site will feature double pods, more common spaces, as well as our co-working concept which will be called Jucy Share.

“In addition to offering these facilities to our guests, other visitors to the cbd will be able to hire meeting rooms by the hour.”

Mr Alpe said the company was moving towards a “journeys-based approach” strategy across its portfolio, catering more holistically for visitors’ needs as they travel the country.

The new hotel will employ about 30 staff, and also house a retail centre & a Miss Lucy’s pizzeria & bar: “Our retail, food & beverage offerings will be specifically designed to create an environment for our millennial travellers. It may include a barber, tattoo parlour, clothing & other types of stores popular with this demographic.”

Attribution: Company release.

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