Building development in the blood

Mark Francis

The instigator of a new $100 million property company float credits his father with instilling in him a passion for real estate - but rejects any suggestion he is backed by family money.

Mark Francis, son of multimillionaire Auckland investor and former Force Corp chief Peter Francis, is 32 and the managing director of Augusta Group, one of the companies involved in the float of Kermadec Property Fund, which plans to raise $60 million.

Developer Jamie Peters, brothers Mark and Chris Francis, and former Capital Properties and Bluechip chief Nick Wevers are involved in the company, which expects to register a prospectus next month. The concept sprang from Peters' Starline Group and Mark Francis' property syndication business Augusta Capital Management.

Chris Francis, an accountant, returned from running a Sydney hedge fund to join his brother Mark. Mark Francis went to Auckland's Sacred Heart, then won a rugby scholarship at King's College in Otahuhu for his last two years, playing on the wing for the First XV in 1991 and 1992 before shifting south to the University of Otago, where he got a bachelor of commerce degree.

During university holiday breaks, Mark Francis returned to Auckland to work at Force. There he met Force development boss Derek Presland, who later joined him at Augusta.

In 1996, Francis shifted to Melbourne to work for entertainment group Village Roadshow on cinema and shopping centre deals.

After 2 1/2 years, he returned to Auckland after being appointed Force's development manager and worked on its most ambitious and controversial deal: the Queen St entertainment centre, now being marketed for sale by international tender with Jones Lang LaSalle.

When it was completed, Peter Francis blamed that property for several of Force's woes. In 2000 when Peter Francis was Force chairman he told shareholders at the company's annual meeting: "The year has been, as Her Majesty the Queen once experienced, an 'annus horribilis'."

He cited Force's protracted legal battle with Australian MTM Entertainment Trust over the aborted sale of the Queen St centre and the tragic death of 16-year-old Danial Gardner of Papakura, who fell from a ledge in the Imax complex.

But Mark Francis is proud of the Queen St property, and particularly his connections, which helped Force bring Borders Books to New Zealand. However, he does not believe a buyer will pay anywhere near the $75 million the centre cost.

In 2000, Mark Francis said he wanted to "do my own thing" so left Force and founded Augusta, named after the masters golf tournament course in Georgia, US.

"The hardest part of it all was thinking up the name," he said, but a golfing passion inspired him.

Working from his Remuera home, he bought industrial buildings in West Auckland and Manukau for around $1 million, and, after refurbishing or reconfiguring internal layouts, made a healthy 20 per cent profit.

Presland was development chief at Force in 2001 when the company was sold to SkyCity and he joined Augusta. Peter Francis, who Mark said was then semi-retired, joined Presland and his son, and together they opened offices in the Chancery.

"The most notable deal we did was last year, selling a Manukau retail centre to ING," Mark said.

Augusta had paid The Warehouse $4.6 million for a 1ha block of land at Lot Four, a $16 million shopping centre at 292 Great South Rd. The Warehouse had bought the land from Manukau City Council for its development but sold that to Augusta, which developed a 17-shop centre with an entertainment and food focus near the Telstra Pacific Events Centre. Domino's Pizza, Subway and United Video are tenants.

Augusta has promoted six syndication offers in the past few years and raised around $25 million to buy properties from Auckland to Invercargill.

Francis said his criteria for buying were having a strong tenant; spending no more than $5 million to $10 million; buying in a location which suited the tenants' needs; and, buying relatively new buildings so they needed less maintenance.

Fees on the syndication deal varied but on the $4.2 million Hastings offer for the Hawkes Bay District Health Board, legal fees were $30,000, accounting fees $7000, issue expenses were $25,000, Augusta's offerer's fee was $156,000, brokerage was $84,000, auditing $4000, the building valuation cost $10,000, and bank legal costs were $3000. Syndicate investors need a minimum $50,000 and the scheme was forecast to make a 9 per cent cash return annually.

Francis wants to spend more time on funds management and less on development, which he sees as too risky. He could not discuss Kermadec, saying he did not want to breach security regulations surrounding a float. But Augusta has little public profile and no website.

But between the float and his young family (twins aged 1, another child aged 2) Francis admits, "There's not much time left now for rugby or golf."

Syndications

* Kaimiaro Nominees: raised $2 million to fund the $3.8 million purchase of premises for Vertex (now Alto Plastics) in Hamilton.

* Kaimanawa St: raised $5.5 million to buy a $9.4 million Palmerston North property.

* Henderson District Court: raised $4.1 million to buy the $7.55 million Auckland building.

* Contact Energy Building: 531 High St, Lower Hutt, raised $5.55 million last year for the $10.25 million building.

* Hawkes Bay District Health Board building: raised $4.2 million for the $7.82 million Hastings building.

* Invercargill retail centre: raised $2.85 million to buy the $5.2 million buildings tenanted by Noel Leeming, Bond and Bond and others.