Augusta Funds Management is to launch its largest ever single asset property fund early in the New Year offering all New Zealanders the opportunity to invest in a huge industrial complex in Penrose, Auckland occupied by New Zealand’s only large-scale glass bottle and jar manufacturer.
Augusta’s new owner, Australian-based Centuria Capital, contracted to buy the 67,655 sq m manufacturing and distribution plant located on an 8.576ha site at 752 Great South Rd with a 20-year lease to Visy Glass Operations (NZ) for $178.3 million. The tenant is part of the Visy Group, one of the world’s largest privately owned paper, packaging and recycling companies with 5,000 employees and more than 120 sites throughout Australasia.
A total of 109,300,000 ordinary shares are being offered in Augusta Penrose Limited, a company to be established to acquire and own the property at $1 per share, to partially fund the acquisition. The balance (approximately 45 per cent) is being funded by bank borrowings.
The offering is being marketed by Bayleys’ Syndication & Investment Products team of Mike Houlker, Samara Phillips, Sarah Prebble and Shirley Leung, with a minimum investment of $50,000 of shares and increments of $10,000 thereafter.
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Houlker says the fund provides all levels of investors with access to an institutional grade property within the industrial property sector which is difficult to find in the current market.
He says there are multiple aspects of the offering which will appeal to investors.
“Firstly, there is a very long lease of 20 years which commences on 25 February 2021, plus five 10-year rights of renewal. Another major benefit to investors is annual rent reviews fixed at three per cent providing built-in rental growth annually for the next 20 years. This equates to a 75 per cent increase in rental income over the initial term of the lease.
“Also, it is a ‘triple net lease’ which is widely considered the most landlord-friendly form of lease. This means Augusta Penrose, as the landlord, is insulated from all liability in relation to the property. For example, any costs of capital expenditure, repair, maintenance and other works are not Augusta Penrose’s responsibility. The lease stipulates the tenant is responsible, and has the same liabilities, in regards to the premises as if the tenant was the ‘owner’
“Arguably, the most compelling aspect of the offering is the massive 85,760 sq m
underlying land holding in a prime position between the Southern Motorway and the main arterial Great South Rd in the heart of one of Auckland’s longest established and most sought-after industrial suburbs. The site benefits from multiple access ways and close motorway and public transport links, as well as a Heavy Industry zoning,” Houlker says.
“Centrally located land with this zoning classification is becoming increasingly scarce in Auckland while strong demand remains from heavy industrial users. This combination of size, location and zoning is rarely available which bodes well for the property’s underlying land value and redevelopment potential in the long term.”
In July this year, the Visy Group acquired the Australasian operations of the world’s largest glass bottle manufacturer, Owen Illinois, creating the Visy Group’s glass business which
operates from the Penrose site as well as locations in Brisbane, Sydney, Melbourne and Adelaide.
Samara Phillips says the tenant is New Zealand’s only large-scale glass bottle and jar manufacturer and under previous names has operated from 752 Great South Rd since 1922. It produces glass packaging for wine, beer, cider, juice, soft drink, spirits, water and food brands. “The scale of its operation is immense with around two million bottles produced at the site each day, using high volumes of recycled glass”.
Augusta Penrose is forecast to provide investors with an initial pre-tax cash distribution of five per cent per annum, paid monthly. Phillips says with the fixed annual rental increases and the tenant’s responsibility for all repairs, maintenance and capital expenditure, the forecast pre-tax cash distribution is projected to increase by 25 basis points in the second and third financial periods to reach 5.5 per cent in the financial year ending March 31, 2024, subject to the risks and assumptions which will be contained in the Product Disclosure Statement to be registered by Augusta Penrose.1
The offering is being structured as a Portfolio Investment Entity (PIE) and will also benefit from the reinstatement of tax deductions for depreciation of commercial and industrial buildings. The offer will be fully underwritten by Centuria Capital, an ASX listed specialist property investment management company with approximately A$10 billion in assets under management including listed and unlisted property funds and investment bonds.
Centuria took over full ownership of the previously NZX listed Augusta Capital in August. Augusta managing director Mark Francis described the purchase of the Visy Glass industrial property as a good example of the type of transformative transaction Augusta Capital can contemplate with the support of the Centuria balance sheet.
“It reflects a new level of horsepower we're now running with, as part of Centuria's ambition to substantially increase the scale, diversity and resilience of our New Zealand portfolio to the benefit of all of our many investors.
“We’re conservative in our approach to shared property ownership structures with a focus on quality assets with strong long-term fundamentals. At the core of our investment philosophy is providing sustainable monthly cash distributions and protecting and growing investors’ equity. The attributes of the Visy Glass property strongly align with this approach.”
The Augusta Penrose fund will be managed by Augusta Funds Management, which has approximately NZ$1.86 billion of assets under management. Bayleys Property Services will provide day-to-day property and facilities management services.
Seminars will be held around the country in late January and early February outlining the offering which opens on January 13, 2021. There will also be an online webinar presentation on January 28, 2021.
