Asset Plus to raise $100m, undeterred by market ructions

Asset Plus chair Bruce Cotterill. Photo / Supplied

Asset Plus looked through heightened market volatility and pressed ahead with plans to raise $100 million.

The company said yesterday it would sell shares at 50 cents apiece in an underwritten 1.235-for-1 pro rata rights offer to help fund two developments that would overhaul its portfolio. That was a discount to the 58 cents the shares closed at on Monday. And while they sank to 53 cents yesterday, they've recovered to to 55 cents today.

The funds raised would go towards a $115m development in Auckland's Munro Lane, with Auckland Council as a cornerstone tenant for 15 years. They would also give the firm scope for a bigger development at its Graham Street building.

The property investor announced its rights issue in the wake of a global stock market rout, where things got so dire, Wall Street's automatic stabilisers kicked in because the slide was so steep.

Chair Bruce Cotterill said the plan to reposition the company and the fundamentals underpinning it stacked up.

"We haven't deviated from the plan we set out on. Certainly, we asked the question, particularly over last week given changes in market conditions," Cotterill told BusinessDesk.

"We're confident of our ability to get the fund raising away and that's what we're going to have a crack doing."

Cotterill said the board tested the appetite to support the offer, and decided to press on despite the broader market volatility.

Cornerstone shareholder and manager Augusta Capital committed to subscribe to $5m of the capital raising, and Jarden - which is managing the offer - will underwrite it.

Shareholders will vote on the capital raising and development plans at a special meeting in Auckland on March 31.

Cotterill said the board had received "terrific support" for its strategy from institutional shareholders, who backed the case for change long before his appointment in 2017.

"They're the ones who've wanted to see this company recover," he said. "They've supported the Augusta vision and supported the process we've been through every step of the way."

Augusta had to fend off an alternative strategy for Asset Plus from Kiwi Property Group in 2016. The much larger company offered to buy the management contract, sell it two properties, and take a cornerstone stake.

That proposal was ultimately rejected and Augusta won over its fellow shareholders when it bought the management contract.

Among those was Salt Funds Management, which strongly opposed the Kiwi Property Group bid.

Its managing director, Matt Goodson, said the timing for Asset Plus to raise money wasn't ideal, but would help prove it can finance the Munro Lane development.

"It does look an absolute A-plus tenant, who will always pay the bills, with a very long lease term, and a pretty simple build," Goodson said. "It does look quite transformative for Asset Plus."

The property investor said it expected to sell its Eastgate mall in Christchurch to help fund the two developments. And if it all went ahead as planned, its $160.7m portfolio generating $10.2m of annual rental income would swell to $419.1m with $22.4m of annual income.