The third stage of Augusta Industrial Fund Limited, a portfolio of industrial properties managed by Centuria NZ (formerly Augusta Funds Management Limited), opens for investment next week to enable a property currently under development in Mangere to be added to the portfolio.
The property comprises a fully leased industrial complex at 78 Tidal Road which is part of a recently developed nine-lot business park. It encompasses 4.9ha of land and an architecturally designed, A Grade industrial facility with a net lettable area of approximately 15,000sqm that is scheduled for completion in September 2021.
The purchase price for the property is $48.83 million and it has been valued at $55 million by JLL on an “as if complete basis”, as at 31 March 2021. Its acquisition will be funded by the issuing of ordinary shares, priced at $1.33 each, in the limited liability company Augusta Industrial Fund Limited (Augusta Industrial). It was established in April 2018 and has previously acquired 11 industrial properties.
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Shares are available to investors in multiples of $1,000, with a $10,000 minimum investment (rounded down to the nearest whole share). The offering is forecast to initially provide a pre-tax cash return of 5% (6.65 cents per share) per annum, paid monthly.
Marketed by Mike Houlker, Samara Phillips, Sarah Prebble and Shirley Leung of Bayleys’ Syndication and Investment Products division, the offering closes on June 23, 2021.
Houlker says Augusta Industrial is looking to raise up to $80 million of new share capital which will be used to not only purchase the Mangere property but to also provide flexibility to fund further acquisitions and investment within the existing portfolio, meet offer costs and reduce gearing to provide a platform for growth.
“Augusta Industrial provides investors with exposure to a sector that continues to out-perform the commercial office and retail property sectors, a continuation of a long-term trend that’ we’ve seen over the past 15 years.”
Centuria Capital NZ has provided a firm commitment to subscribe for at least $8 million of the new shares to maintain its 10 per cent cornerstone shareholding in Augusta Industrial, says Houlker. “This means that it has considerable skin in the game and has a significant incentive to ensure the fund is performing well.”
Samara Phillips says the Tidal Rd property comprises two warehouses each with adjoining offices. A larger warehouse (providing 85 percent of rental income) is being purpose-built for long-established liquor distributor Hancocks Wine, Spirit and Beer Merchants Limited for use as their national distribution facility and head office. They will take a new 12-year lease upon the building’s completion, with rights of renewal totaling a further 10 years.
“A second smaller warehouse has an initial four-year lease to AutoPacific, a market leader in vehicle accessories, established in 1951 and with 600 employees and facilities in Australasia and Thailand,” Phillips says.
Both leases have fixed annual rental increases of 2.5%, with the Hancocks lease also having four-year rent reviews to market.
“The property is located in one of Auckland’s most central logistics locations, close to Auckland International Airport and only minutes from the Massey Road interchange with State Highway 20 which provides both north and southbound access,” says Phillips.
Following acquisition of the Tidal Road property, Augusta Industrial’s portfolio will comprise 12 properties, 10 located in Auckland and one each in Wellington and Christchurch, with a total of 50 tenants and a combined value of over $460 million.
Augusta Industrial director Mark Francis says the fund was established to provide investors with the opportunity to invest in a portfolio of strategically selected industrial assets that provide both tenant and location diversification within this strongly performing sector of the New Zealand property market.
“Augusta Industrial has performed well with an annualised pre-tax total return (cash distributions and capital growth) of 15% per annum since its inception in April 2018. A key long term strategic investment objective is to deliver sustainable and stable income distributions paid to investors monthly, along with the potential for long-term capital growth.
“Augusta Industrial will continue to look for opportunities to grow its portfolio which this equity raise supports and, depending on market conditions, may look to list Augusta Industrial on the NZX Main Board in the future, although there is no guarantee of this.”
Augusta Industrial has received strong demand from investors, with its previous equity raises totalling $190 million both oversubscribed. Francis say strong investor appetite for quality industrial property underpins the valuation growth that has occurred since the existing assets in the portfolio were purchased.
“The total purchase price for the assets (including Tidal Road) was $376.217 million and the total valuation as at 31 March 2021 (including Tidal Road on an “as if complete” basis) is $463.250 million. This equates to a Net Tangible Asset (NTA) backing of $1.33 per share and a gearing ratio of 37% as at 31 March 2021. The gearing will reduce to 19.2% following the allotment of shares on offer and will be 27.9% upon the settlement of the Tidal Road property.”
Augusta Industrial is managed by Centuria NZ which is a subsidiary of Centuria Capital Group, an ASX-listed investment management company with approximately A$10.5 billion of property assets under management. This is expected to increase to A$15.5 billion shortly as a result of its proposed acquisition of ASX-listed Primewest Group. Centuria merged with previously NZX-listed Augusta Capital last year.
Francis says Augusta Industrial intends to change its name to Centuria NZ Industrial Fund Limited later in 2021 as part of Augusta’s adoption of the Centuria brand. “This will be a name change only and the same management team in New Zealand remains responsible for the performance of the fund going forward.”
Augusta Industrial is structured as a Portfolio Investment Entity (PIE) with tax deducted at an investor’s prescribed tax rate up to a maximum of 28 per cent.
Applications for shares can be made once the offer opens, via a Product Disclosure Statement available from Bayleys or by visiting www.augustaindustrialfund.co.nz. Details on how the forecast pre-tax distributions are calculated and the risks associated with the investment can also be found in the Product Disclosure Statement.
