Augusta Funds Management’s latest offering will enable smaller investors to share in the ownership of a brand new premium grade Auckland commercial property which has fast growing accounting software company Xero as its anchor tenant.
Xero has taken a long-term lease over more than half of the net lettable space in a striking new office building developed by Mansons TCLM Ltd at 96 St Georges Bay Rd, Parnell. Augusta has unconditionally agreed to purchase the building which has a total net lettable floor area of just over 11,000 sq m and the 3,846 sq m freehold corner site it is situated on for $116 million.
Augusta is aiming to raise $68.5 million of investors’ equity to facilitate the acquisition through the offering of 1370 $50,000 interests in the Augusta St Georges Bay Road Property Trust that will then own the property. A $54 million loan from Westpac, with interest rates fixed for four years, will cover the balance of the purchase price and establishment costs.
Mike Houlker, Samara Phillips and Sarah Prebble, of Bayleys Investment Products and Syndications division are sole selling agents for the offering which is forecast to provide investors with an annual pre-tax return of 7%, paid monthly.
“This newly built commercial property comprises four levels of high quality office accommodation and three ground floor retail premises along with two levels of basement parking for 177 cars,” says Augusta managing director Mark Francis. “An impressive central atrium allows natural light to stream through the building and the well thought out floor plates also provide long term flexibility to vary tenancy sizes.
“The building is being constructed to a 5 Green-star rated standard by Mansons which has built more certified green star office premises than any other developer in New Zealand. Mansons also stands behind its work and provides a 10-year expenditure and defects warranty giving investors peace of mind that there will be no unforeseen capital expenditure.”
Xero is leasing 6005 sq m on two levels of the building on a 12-year lease with rights of renewal through until 2042. Fit out works are scheduled to commence next month with all of the company’s 650 Auckland employees expected to move into the building in November.
“Xero is one of New Zealand’s great global success stories and is considered a leader in Australasian and United Kingdom cloud accounting markets,” Mr Francis says. “It is among an increasing array of high calibre tenants that are now occupying buildings that Augusta manages.”
Mike Houlker says additional comfort for investors comes from the fact that the rental on Xero’s lease is secured by a bank guarantee for $13.5 million plus GST (reducing to nil over the initial 12 year lease).
Harrison Grierson will occupy the 2,866 sq m top floor of the building and its 10-year lease has a bank guarantee of $6 million (reducing to nil over the initial lease term). Established 130 years ago, it is widely recognised as one of the leading engineering and design consultancies in New Zealand, says Houlker.
Independent Liquor is leasing 1,381 sq m on Level 1, also for 10 years. Independent Liquor’s most recently publicly available financial statements note that the company had a profit of $23.42m for the year ended December 31, 2017.
Mr Houlker says Mansons has agreed to underwrite the rental on the remaining vacant 421 sq m of office space on Level One and ground floor retail space of 146 sq m not yet leased, for nine years or until tenanted.
Samara Phillips says St Georges Bay Rd is currently undergoing a major transformation with Mansons constructing a 6-star Green Star rated head office building next door and recently completed developments providing a range of retail and food and beverage offerings along St Georges Bay Rd and Faraday St.
The Augusta St Georges Bay Rd Property Trust offering is fully underwritten and will register to be a portfolio investment entity (PIE).
Applications for one or more of the $50,000 units in the offer can only be made via a Product Disclosure Statement available from Bayleys or by visiting the website http://premiumaucklandproperty.co.nz
The Product Disclosure Statement also provides details on how the forecast pre-tax return is calculated and the risks associated with the investment. The offer closes on September 18, 2018.