SALLY LINDSAY | NBR | MARCH 20th
NZX-listed property company NPT is to be turned into a value-add vehicle under Augusta Capital’s guidance after shareholders voted by 97% in favour selling the management of the company to its 19.8% shareholder.
Augusta’s managing director Mark Francis told shareholders NPT will be rebranded to get rid of a legacy of poor performance, it will take a new creative direction turning unloved properties into sought-after assets and its size and scale will be increased. Mr Francis says the strategy suits the low yield and debt environment the property industry is operating in.
“To be honest, NPT doesn’t have any properties in its portfolio Augusta is in love with and we will sell some, apart from the Eastgate shopping centre in Christchurch, which has been under poor management, and we have about three new properties we are doing due diligence on and could add them to the portfolio,” Mr Francis says.
Asked by a shareholder why Augusta didn’t do a full takeover of NPT, he says it comes down to the company’s strategy. “We are about managing funds with co-investment stakes without owning them outright.
“We have a range of different sectors we see ourselves being invested in and being the manager of funds in those spaces and NPT will become our value-add play. Our business plan is to be the fund manager and not the end owner.”
He says Augusta’s focus is also on shareholder value. “I think everybody has had a gutsful of seeing NPT’s stock trade at 58-59c when it has a net tangible asset backing of 72c.” He doesn’t expect it will lift overnight but, as the market sees Augusta get a few runs on the board, it will change. “We have some idea what we want to do with Eastgate – we are trying to realise some value there and we will be judged by the first one or two new acquisitions to the table.”
NPT is selling the management contract to Augusta for $4.5 million, $1 million more than Augusta offered in a similar proposal in 2016. NPT will pay a base management fee to Augusta of 0.5% on assets up to $500 million, plus extra fees for property management, performance, leasing, acquisition and development management.
Augusta said the deal would initially increase its base management fee income by $900,000, while NPT said the deal would lower its corporate overhead costs and provide access to resources and expertise it could not otherwise afford. As a related party, August Capital was not be entitled to vote on the transaction. The deal includes the right for NPT to discontinue the management agreement after five years on the same 3.8 fees multiple used to calculate the selling of the management contract. NPT shares last traded at 59c, valuing the company at $95.5 million.
The company owns a small portfolio of retail and industrial property including Eastgate Shopping Centre in Christchurch and a Heinz Wattie distribution centre in Hawkes Bay. Augusta Capital shares last traded at $1.06, valuing the company at $92.8 million. Augusta also owns a property portfolio in Auckland but its focus is as a property manager and it has $1.7 billion in funds under management.