Augusta offers syndication in Oz to Kiwis
View of the proposed Australian property for syndication at 373 Sherbrooke Rd, Willawong, Brisbane.
Augusta Funds Management Limited is adding to its portfolio of Australian properties by syndicating a recently completed industrial building in Brisbane to New Zealand investors.
The property, located at 373 Sherbrooke Road in the south western Brisbane suburb of Willawong, has a new eight year lease to a wholly owned Australian subsidiary of the Akzo Nobel global paint and coatings group whose brands include Dulux.
“A separate Australian subsidiary of the Akzo Nobel group guarantees the obligations of the tenant,” says Mike Houlker, head of syndication & investment products for Bayleys, who is marketing the syndication offer with colleagues Samara Phillips and Sarah Prebble.
“A total of 135 proportional interests of AU$50,000 each are being offered in an Australian limited liability partnership which will own the property,” Houlker says. “The closing date for taking up the offer is 5pm on November 5. The partnership is projected to receive an initial pre-tax return of 8.14 per cent for the first full financial year to June 30, 2017, with monthly distributions to investors.”
Augusta, through its acquisition last year of KCL Property, has 10 properties in Brisbane with a value of AU$68,000,000 under management. Augusta managing director Mark Francis says one of the reasons Augusta purchased KCL was to build on its knowledge and experience in the Australian funds management market.
“A large number of investors in Augusta syndications are participants in more than one of our schemes which enable risk to be spread across different property types and locations,” Francis says. “Diversification into the Australian commercial property market, which is at an earlier stage in the current upward cycle than New Zealand, will be an integral part of our investment offerings moving forward.”
Augusta executive director Bryce Barnett, who founded KCL and has more than 20 years’ involvement in the Australian property market, says the Brisbane industrial property sector is experiencing strong levels of leasing and sales activity which has resulted in falling vacancy rates, rising rentals and yield compression.
“Our managed properties in Brisbane are all fully leased and performing well and the vast majority have experienced very good capital growth in recent times. We have chosen this property for syndication because it’s a brand new, low maintenance building with a long established multinational tenant which is a global leader in its market sectors.
“The property is also located in a growth area within Brisbane’s south western industrial precinct where leasing activity has been particularly pronounced and has driven vacancy rates to very low levels especially for prime grade, freestanding warehouses.”
Houlker says Bayleys is expecting a strong take up of the offering given the limited number of interests being offered and the diversification opportunity it offers investors.
Interior view of 373 Sherbrooke Road, Willawong, Brisbane.
The property encompasses a land holding of 8018 sq m in a light industrial area and a 2707 sq m high stud warehouse and two-storey office building which the tenant moved into in June. It has an independent valuation of AU$10,660,000.
“The building has been developed to a high standard as the main administrative and storage base for Akzo Nobel in Queensland,” says Houlker. “The lease also has built in rental growth with annual fixed rental increases to the higher of 3.5 per cent or the Brisbane Consumer Price Index. This will provide a significant increase in the rental income from the property over the eight year term of the lease.
“There will also be a rent review to market on each of the two five-year rights of renewal, with this rental adjustment to be not less than 95 per cent and not more than 110 per cent of the previous year’s rent.”
The lease is guaranteed by Akzo Nobel Coatings (Holdings) Pty Ltd, an Australian holding company of Akzo Nobel N.V., which is also a major global producer of speciality chemicals as well as paints and coatings.
With its headquarters in Amsterdam, the multinational employs approximately 47,000 people in around 80 countries and its brands include Dulux, Sikkens, International, Interpon and Eka.
Phillips, who is syndicated investments manager at Bayleys,says the Brisbane property’s net lease structure means the tenant is responsible for all outgoings including land tax and property management fees.
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.
Phillips says investors will have the option of having distributions paid into an Australian dollar bank account in Australia or New Zealand or converted into New Zealand dollars for banking in this country.
The partnership will be overseen by Covenant Trustees Services Limited as statutory supervisor.
Augusta Funds Management is a wholly-owned subsidiary of NZX listed Augusta Capital Limited and has in excess of $1.3 billion of assets under management.
Public syndications concluded so far this year in conjunction with Bayleys’ syndication division have included the sale of 686 units of $50,000 totalling $34,300,000 in the Southgate Shopping Centre in Takinini and 120 units in an industrial building in Middleton, Christchurch for $6 million.
From left to right: Mark Francis, of Augusta, Samara Phillips, Bayleys, Mark Francis, Augusta.