Augusta Funds Management has launched its latest syndication scheme based on a new Bunnings Warehouse in Silverdale north of Auckland in which 254 proportionate shares are being offered at $50,000 each with a projected annual return of 8 per cent.
The new store at 18 Hibiscus Coast Highway on a high-profile corner with Brian Smith Drive and just south of Orewa is a recent design build by Bunnings and has a total building area of about 12,000sq m of lettable space.
It encompasses a main trading area of around 8370sq m including a drive-through warehouse component, together with a partly covered gardening centre of about 1835sq m and a timber yard and covered delivery area of approximately 1290sq m.
The site about 40km north of the Auckland Harbour Bridge provides a level building platform with onsite car parking for approximately 270 cars.
"Subscribers may apply to purchase more than one proportionate $50,000 share," says Mike Houlker of Bayleys Auckland, who is marketing the property syndication with colleague Samara Phillips.
According to the investment statement, the property was purchased for $20,850,000 by Augusta Capital from Bunnings as part of a sale and lease-back transaction. As at March 17 it was valued in accordance with international and New Zealand valuation standards at $22,350,000. Settlement of the purchase of the property is scheduled for May 7.
The funding balance on completion of a fully subscribed proportional ownership scheme will be by way of a mortgage to the ASB Bank.
Houlker says Bunnings has signed a new 12-year lease from March 25, with rights of renewal out to 2048, and pays a current total net rental of $1,530,376 per annum plus GST and outgoings.
"This complex occupies a high-profile freehold site of 2.57 hectares in a fast-developing location with regular growth through fixed annual 3 per cent rent reviews for the first 12 year term of lease," he says.
"The scheme will be professionally managed by Augusta Funds with the parent company Augusta Capital Ltd fully underwriting it and will be overseen by Covenant Trustee Company Ltd as supervisor."
The official name of the scheme is the "18 Hibiscus Coast Highway, Silverdale Real Property Proportionate Ownership Scheme" with Augusta Funds Management being the manager with its registered office at 35 Chancery St, Auckland Central.
Augusta Funds Management is a wholly owned subsidiary of Augusta Capital which is an NZX-listed company with a market capitalisation of about $67 million.
Augusta Funds Management bought KCL Property (KCL) and Investment Property Titles (IPT) on April 1 to establish Augusta Funds Management as New Zealand's pre-eminent property funds manager with about 170 properties and total funds under management of around $1.2 billion.
Augusta has entered into a strategic alliance with Bayleys to provide property and facilities management of the Augusta group's property portfolio including this property.
Major properties managed under syndication include those leased to Bendon, Contact Energy, ASB Bank, Coca-Cola, Downer EDI, ENZA Foods, Carters and tenanted to Countdown supermarkets in Westgate, Huntly and Fraser Cove, Tauranga.
Mark Francis, the managing director of Augusta, says the structure of the Silverdale Bunnings scheme is similar to other earlier offerings by the company. Subscribers will acquire a beneficial interest in the Bunnings Silverdale store with a certificate of title held on behalf of each investor by Hibiscus Nominees and subscribers will have the right to sell their proportionate shares at any time during the term of the scheme.
"The scheme is projected to provide a cash return of 8 per cent per annum in the first year with a fixed rent review structure providing potential scope for future growth in return," Francis says.
"There is no fixed term for the property to be sold but it could be wound up upon the passing of a special resolution of subscribers, with one vote attributed to each.
"On a winding up of the scheme, subscribers may receive a return that is greater than the $50,000 paid for each proportionate share if the net sale proceeds from the sale of the property exceed the total capital paid by subscribers but there are no guarantees of this.
"While proportionate shares are not shares per se, they have many of the features of shares in the sense that the subscribers are the 'beneficial owners' of the property and have similar risks and rewards as shareholders."
He says the offer to investors for proportionate shares closes at 5pm on April 30 but Augusta reserves the right to close the offer at any time prior to that date or to extend the offer by up to seven working days without prior notice to subscribers.
Francis says Augusta Capital, the manager's parent company, has agreed to fully underwrite the offer up to the full 254 proportionate shares in the scheme for an under- writing fee of $254,000, being 2 per cent of the total subscriptions to be raised.
"Each proportionate share will confer equal rights and obligations on the holder in respect of entitlements to income and capital belonging to the scheme and each proportionate share will confer one vote upon the holder in respect of matters on which subscribers are entitled to vote," he says. "The relationship between the subscribers is that of joint venturers."
Phillips says Silverdale has become more accessible in the past 10 or so years due to the northern motorway section of State Highway 1 being constructed with a Silverdale off-ramp.
"In recent years State Highway 1 has been further extended so that a toll road extends to Puhoi without traffic having to exit at Orewa as was the case previously," she says.
Phillips says Silverdale has become an increasingly popular and expanding residential suburb with the ongoing Millwater subdivision, planned north of Hibiscus Coast Highway, comprising some 3000 sections upon full completion.
"Recent commercial development in Silverdale includes the new Silverdale Centre situated about 1.2km to the northeast of the Bunnings store," she says. "This development was recently sold to DNZ and is anchored by The Warehouse and a Countdown supermarket.
"Smaller retail developments at Silverdale Town Centre have also recently been completed or are under development. A recently opened Pak'nSave supermarket adjoins the property while a Kings Plant Barn and a Resene Colourshop are on the intersection of East Coast Rd and Hibiscus Coast Highway.
"To the east of Tavern Rd is an industrial pocket with various trade and heavier uses, where a new Placemakers is under construction."
Phillips says investors are expected to be attracted to the scheme by the solid business reputation of the tenant, Bunnings, which is a New Zealand incorporated subsidiary of Wesfarmers, a diversified Australian industrial corporation listed on the ASX in Australia. "However, it should be noted that Wesfarmers does not guarantee the lease," she says.
From its origins in 1914 as a Western Australian farmers' co-operative, Wesfarmers has grown into one of Australia's largest listed companies and employers. Its diverse business operations cover supermarkets, department stores, home improvement and office supplies; coal mining; chemicals, energy and fertilisers; and industrial and safety products.
"The Bunnings division is a leading retailer of home improvement and outdoor living products in Australia and New Zealand and a major supplier to project builders, commercial tradespeople and the housing industry," Phillips says.