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Augusta launches latest syndication

Tags: Auckland Commercial

The balance of a large office and retail property on the corner of Victoria and Graham Street in Auckland’s CBD is to be syndicated by Augusta Funds Management Limited following the success of the syndication of Building A in the complex.


Augusta is now offering 1,050 $50,000 investment units in a limited partnership (LP) that will own the remainder of the property in which media organisation NZME is the largest tenant.
 
The latest offering includes a second, 7,147 sq m office building (Building B) which has substantial frontage and signage exposure to Victoria Street West and is connected to Building A on Graham Street by a large central atrium.

It also encompasses a smaller retail building (Building C) which, along with part of the ground floor of Building B, is occupied by a number of service retailers such as food and beverage outlets and hairdressers which will draw much of their business from the more than1,500 people working in the two office buildings.

The latest offering has an initial forecast pre-tax cash return of seven per cent per annum, increasing to 7.25 per cent for the year ending March 31, 2019, to 7.5 percent for the following year and to 7.75 per cent for the year ending March 31, 2021.

The Product Disclosure Statement for the offering makes it clear that the forecast figures are not guaranteed and the actual distribution may vary. However, Augusta managing director Mark Francis says the forecast increases are based on fixed rental increases across all of the leases, as well as a fixed interest rate for four years from 1 April 2017 on the bank loan which will part fund the acquisition of the property. A capital expenditure and defects warranty from the vendor Mansons TCLM also means Mansons will generally be responsible for repairing any building defects until March 2026.

Francis says the strong response to the Building A syndication, which attracted $70 million of investors’ equity, prompted the decision to bring the remainder of the property to the market as well.

“There was huge investor interest in that opportunity, with higher demand than the number of units available resulting in the offer being oversubscribed despite it being by far and away the biggest syndication we have ever undertaken. We believe there remains unfulfilled investor demand for this type of quality product which is hard to find in the New Zealand market, particularly for smaller investors.”

Mike Houlker, head of Bayleys Investment Products and Syndications division which is marketing the offering, says it shares many of the attributes that generated such high interest in Building A.

“It’s a premium-grade investment property offering, providing a significantly better return than the current very low bank deposit rates from a number of recently signed long-term leases to a mix of very substantial corporate tenants.”

The property has a Weighted Average Lease Term (WALT) of 11.22 years by income. One of New Zealand’s largest media organsations NZME Limited has a 15-year lease over approximately a third of Building B with two six-year rights of renewal. NZME operates a wide range of print, radio and online media businesses such as The New Zealand Herald, Newstalk ZB and GrabOne and its currently seeking the necessary approvals to merge its business with the New Zealand operations of Fairfax Media.

Meredith Connell, Crown Solicitors for Auckland (excluding Manukau) occupies the top floor of the building on a 12-year lease with a six-year right of renewal. Both the law firm and NZME occupy the same levels in Building A which are connected by suspended walk bridges across the glazed central atrium.

The other two office floors in Building B are occupied by Maersk, the world's largest container shipping operator, and Kotahi, a logistics and distribution joint venture between Fonterra and Silver Fern Farms. These two tenants are on new nine-year leases.

Bayleys’ syndicated investment manager Samara Phillips says investors will benefit from significant built in rental growth across these office leases. They all have fixed annual rental increases of three percent per annum starting at the beginning of the third year of the lease to NZME and at the second year of leases to other tenants.

“Investors will also own a share of a 5 green star rated property that has won the Supreme Award for the best new development in the Property Council New Zealand Rider Levett Bucknall Property Industry Awards for 2016,” says Houlker.  Chief awards judge John Dunn described the building as an outstanding property development. “High levels of sustainability were incorporated into the design and exemplary tenant usability and satisfaction have been achieved. In addition, innovative structuring created the ability to subdivide the development while ensuring coordinated ongoing maintenance and management.”

Phillips says the quality of the development has also been reflected in the rapid tenant take up of space. The last remaining office floor, in Building A, has recently been leased by BDO which also has naming rights over the entire complex which will now be known as the BDO Centre.

The LP investment scheme which will own Buildings B & C will be overseen by Covenant Trustees Services Limited as supervisor. Augusta Funds Management will be responsible for the establishment, administration and management of the LP, the preparation of annual financial statements and the payment of monthly income distributions.

Augusta Funds Management is a wholly-owned subsidiary of NZX listed Augusta Capital Limited and has in excess of NZ$1.5 billion of assets under management on behalf of around 4000 investors and encompassing over 150 commercial and industrial premises in New Zealand and Australia.

A copy of the Product Disclosure Statement can be found at www.premiumaucklandproperty.co.nz




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