Carter Holt Harvey’s manufacturing plant up for syndication

Wednesday, 24 April 2013, 10:46 am
Press Release: Bayley's Real Estate

Carter Holt Harvey’s manufacturing plant up for syndication sell-down

Investors are being offered the opportunity to share in the ownership of Carter Holt Harvey’s paper bag manufacturing facility at 33 Hugo Johnston Drive, Penrose, in the latest proportionate ownership scheme to be launched by Augusta Funds Management Limited.

Augusta Funds Management Limited has entered into an agreement to acquire the land and buildings occupied by Carter Holt Harvey’s paper bag division, at 33-43 Hugo Johnston Drive in Penrose, Auckland and is syndicating ownership of the property.

The Prospectus and the Investment Statement indicate the scheme will provide investors with a projected initial annual cash return of nine per cent before tax.
A total of 192 individual proportionate shares are being offered, at $50,000 each, which provide investors with a beneficial interest in the freehold title of the property.

The offering is being marketed by Bayleys Real Estate, with applications closing on May 24. Subscribers are able to apply for a single or multiple proportionate shares. The offer is fully underwritten by Augusta Funds Management’s parent company Augusta Capital Limited which gives investors certainty that the offer will proceed. The sell-down is being managed by Bayleys Head of Syndication Mike Houlker.

Augusta Funds Management director Chris Francis said the offering followed a series of successful proportionate ownership schemes established by the company, including a number of Countdown supermarket properties and ASB’s national support centre in Auckland.

Augusta Funds Management Limited is a wholly owned subsidiary of Augusta Capital Limited, a NZX Listed company specialising in commercial property investment and funds management. Its portfolio includes more than $300 million of commercial property.

“The Carter Holt Harvey bag division manufacturing plant syndication presents an opportunity for smaller investors to be involved in a significant commercial property investment,” Francis said.

“Augusta Funds Management’s proportionate ownership schemes are structured to provide investors with a high yielding investment in high quality commercial and industrial real estate, without the burdens of private property ownership.

“All schemes are managed by Augusta Funds Management, including facilities and property management, preparation of annual financial statements and payment of monthly distributions.

Augusta Funds Management also arranges all aspects of bank funding for its schemes, including interest rate hedging and long term non-recourse facilities.

Carter Holt Harvey’s lease over the Penrose building is for an initial term of 10 years, from settlement with three rights of renewal of five years each. The building generates an annual rental income of $1.2 million (plus GST), with rental adjustments each year linked to the Consumer Price Index capped at 2.5% and with market-linked reviews every five years.

“As set out in the prospectus and the investment statement, the scheme is projected to provide a cash return of 9.0% p.a. (before tax) in the first year with the rent review structure providing scope for growth in the long-term,” Francis said.

Francis said the property, valued at $14.65million, would be purchased for a total of $14.2million (plus GST, if any). The syndication investors would put forward a total of $9.6million, with the balance funded by a first mortgage loan facility.

The full details of the calculated returns and prospective financial statements are set out in the prospectus and the investment statement, Mr Francis said.

Bayleys Real Estate’s Head of Syndication and Authorised Financial Adviser Mike Houlker said Carter Holt Harvey’s industrial complex was in a sought after location on a 3.24 hectare site in the Penrose industrial precinct.

“It is in the most central of all Auckland’s industrial locations, with easy motorway access to Auckland’s CBD and State Highway One. Penrose is the base for many of New Zealand’s most well-known and well-established companies, including Carter Holt Harvey,” he said.

“Additionally, there also is a large sealed yard at the rear of this property ear-marked for future expansion possibilities.”

Mr Houlker said the property comprised of an air-conditioned offices; a freestanding laboratory; and a sprinkler protected warehouse/factory. The warehouse was built in the 1980s and extended in 2001, and a roof refurbishment is to be completed by Carter Holt Harvey within two years of settlement.

“The CHH bag division manufactures approximately 100 million bags per annum and is the leading supplier of multi-ply paper sacks in New Zealand. It also exports significant volumes to Australia and Latin America.

“The CHH bag division operates both an industrial plant - focused on cement, non-food product - and a hygiene facility where milk powder, flour and other food bags are manufactured in an environment fully certified by the International Standards Organisation.”

ENDS

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