Augusta’s Aussie buildings promise great returns

5:01 AM Saturday April 30, 2016 True Commercial

The property in Queensland comprises these side-by-side freestanding modern warehouses.

A large Queensland industrial property with two long-term leases to established Australian tenants — which provide annual rental growth of 3.5 and 4 per cent — is being syndicated by Augusta Funds Management Ltd in its latest Australian offering to New Zealand investors.

The property at 76 Quinns Hill Rd, Stapylton, on an approximately 4.117ha site near a major freight route between Brisbane and Surfers Paradise, comprises two freestanding high-stud modern warehouses built in 2011.

One of the warehouses has a new 13.5-year lease to A&L Windows (Qld) Pty Limited which has manufactured and distributed windows and doors along the eastern seaboard of Australia for about 20 years, while the other has a nine-year lease to Nu-Pure Pty Ltd, one of the largest independent bottled water manufacturing companies in Australia.

An 1192sq m extension of its premises is under way and the new lease will take effect from its completion.

A total of 280 units of AU$50,000 each are being offered in an Australian limited liability partnership (LLP) which Augusta is establishing to own the property. Augusta will make monthly cash distributions to investors expected to be the equivalent of seven per cent per annum, after the Australian tax rate of 30 per cent for LLPs for the first two years of the syndication’s operation.

The offering is being marketed by Mike Houlker, Samara Philips and Sarah Prebble of Bayleys’ Syndication Division.

Houlker says the property’s built-in annual rental growth makes it ideal for syndication and will provide a substantial increase in rental income across the two tenancies given their long leases. A&L Windows’ lease has fixed annual rental increases of 3.5 per cent while Nu-Pure’s rent will grow annually by either 4 per cent or by the Consumer Price Index, whichever is greater.

Strategic location

Bryce Barnett, Augusta’s head of funds management, says the quality of a property’s cash flow has become a driving investment consideration for Augusta when selecting properties for syndications.

“The terms and conditions of the leases, including length of tenure and rent review provisions, have become increasingly important and properties that have set rental increases ahead of the current extremely low rate of inflation are attractive propositions for investors.”

Locational growth factors, like roading or zoning changes, population growth or the increased popularity of certain areas will also contribute to an increase in capital values in specific locations, and are another key consideration in syndication selection, Barnett says.

He says the Stapylton property is strategically positioned between Brisbane and Surfers Paradise.

“The property is in the emerging Yatala Enterprise Area on a major freight route in South East Queensland, underpinned by significant roading infrastructure and linkages between Brisbane’s CBD, the Gold Coast and Ipswich, via two major nearby highways.

“Due to distribution growth within Queensland and congestion within inner industrial precincts of Brisbane, major companies, including Australia Post, Aldi and Visy, have taken positions within the Yatala Enterprise Area, recognising its importance as a logistical hub and future growth corridor.”

Barnett has more than 20 years’ experience in managing and syndicating Australian properties, formerly as head of KCL Properties which merged with Augusta in 2014.

The company has 12 Queensland properties in its syndication portfolio with a value of approximately A$85 million.

“We regard investment in Australian property syndications as a good way for smaller New Zealand investors to diversify their property portfolios,” Barnett says.

“In our opinion, the Queensland industrial property sector is experiencing strong levels of leasing and sales activity which has resulted in falling vacancy rates, rising rentals and yield compression. We expect that Australian properties will continue to be an important part of Augusta’s investment offerings going forward.”

Houlker says the Nu-Pure Building is expected to total about 7102sq m when the current expansion of both warehouse and the office space is completed to provide additional production and distribution space, including a new production line. The company also has a production facility in Victoria.

The neighbouring 6699sq m A&L Building comprises two side-by-side, full length warehouse bays and is serviced by 14 container height roller doors and two five-tonne gantry cranes owned by the LLP as landlord, but fully maintained by the tenant.

Houlker says its site, of about 2421ha, has a surplus yard area of 9627sq m.

Philips says the offering is only open to New Zealand investors, who will have the option of having those distributions paid into an Australian bank account in Australia or New Zealand, or converted into New Zealand dollars for banking in this country.

The investment scheme will be overseen by Covenant Trustees Services Limited as statutory supervisor. Augusta Funds Management will be responsible for the establishment and administration of the limited liability partnership and property management, 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$1.45 billion of assets under management on behalf of more than 3000 investors encompassing over 150 commercial and industrial premises in New Zealand and Australia.

Mike, Samara, Sarah.jpg

(From left) Mike Houlker, Samara Philips, and Sarah Prebble, of Bayleys’ Syndication Division