The Centuria NZ Property Fund (formerly known as the Augusta Property Fund) is intending to raise up to $50 million of capital. It will be used to reduce bank debt to zero to provide the fund with balance sheet capacity for additional acquisitions and to further develop its largest asset, the Anglesea Medical Centre in Hamilton.
Bayleys’ Syndication & Investment Products division is marketing the offering on behalf of Centuria NZ, established out of the merger last year of Augusta Capital and ASX listed Centuria Capital Group. The two long-established fund managers now have combined Trans-Tasman property assets valued at over NZ$17 billion under management.
Bayleys’ Mike Houlker says units in the Centuria NZ Property Fund are available to all investors in New Zealand with a $10,000 minimum investment. Pre-tax income returns are paid monthly.
“The first capital raise we undertook for the Augusta Property Fund last year, prior to the merger with Centuria, was over subscribed within two weeks of opening which resulted in many investors missing out. This second capital raise will provide more investors with the opportunity to participate in the early stages of the fund which now has three properties under direct ownership and is looking to build a substantial portfolio of diversified investments across different property sectors, tenancies and geographical locations.
“The additional capital that will be generated by this offering to investors will provide a strong platform for the further growth of what is now the Centuria NZ Property Fund. The initial repayment of all bank debt will make significant balance sheet capacity available to acquire additional assets and to pursue add value and development opportunities within the portfolio. Bank funding is expected to progressively increase as further acquisitions and development projects occur.”
The fund’s first and highest value asset is the Anglesea Medical Centre which was purchased last year for $55 million and was valued on August 24, 2021, at $59 million. Located on a high profile 2.4ha corner site with three street frontages in Hamilton’s CBD, it is Waikato’s biggest private medical and healthcare complex with 28 tenants. The ten largest tenants having occupied the site for between 11 and 28 years.
Major tenants include Pathlab, one of New Zealand’s largest pathology service providers with one of the most advanced laboratories in the southern hemisphere, Hamilton Radiology, the main facility for this long-established private practice, and Fertility Associates which is the only provider of public and privately funded fertility treatment in the Waikato region. The property is also the home of Anglesea Urgent Care, the only private facility in the broader Hamilton region with the right to operate a 24-hour accident and emergency centre.
Samara Phillips says the current capital raise will provide funding for the development of a two-level building extension of approximately 1,500 sqm at the north-western corner of the site for specialist medical service use, subject to agreeing acceptable commercial terms with the prospective tenant.
She says building coverage of only about 30 percent of the total site area, with height allowances of 16-20m, means other development opportunities remain which Centuria intends to pursue.
Subsequent to the purchase of the Anglesea Medical Centre, the fund also acquired a neighbouring property for $6.446 million. Located at 26 Clarence Street, it has been occupied by the Waikato District Health Board since 2008, with a current six-year lease term from March 2021.
A two-level building extension was completed in 2021 to meet the requirements of the tenant which is currently investing significant expenditure on fit out. This property is adjacent to the rear access to the Anglesea Medical Centre, increasing the future value-add development options for the Anglesea site, whilst currently providing significant cashflow, says Phillips.
The other property the Centuria NZ Property Fund owns is CityFitness gymnasium premises at 196 Roydvale Avenue, Christchurch which was purchased for $9.3 million at a yield of 6.42%, with the transaction settling last month. It was valued in September by JLL at $10.05 million.
Located in a new commercial subdivision close to the airport, the modern facility has a new 12-year lease term and rights of renewal until 2045. The CityFitness Group is a New Zealand domiciled but offshore owned health and fitness group operating at over 40 locations throughout New Zealand.
Centuria NZ managing director Mark Francis says the Centuria NZ Property Fund’s long-term objective is to provide investors with the opportunity to invest in a portfolio of strategically selected directly owned assets, along with other property related investments, within the one investment vehicle.
“The intention of the fund is to grow over time to continue to increase investors’ exposure to a diversity of property investments whilst providing regular monthly cash distributions and the potential for capital growth.”
Francis says Centuria Capital NZ has provided a firm commitment to subscribe for $1,230,500 of the units issued under the current offer (being 1,150,000 units) in addition to the 3,850,000 units it already holds.
“This means Centuria has considerable skin in the game and that the fund manager’s and investors’ interests are aligned.
“The offer is also fully underwritten which provides assurance to investors that it will proceed. Furthermore, to provide additional assurance and to mitigate the effects of any further COVID-19 lockdowns, Centuria Capital NZ will provide a rental underwrite up to $500,000 for all properties for a period of six months from the initial allotment of units.”
The fund is structured as a PIE (Portfolio Investment Entity). This means that the maximum tax rate on monthly distributions will be 28 percent. Phillips says the recent reinstatement of tax deductions for depreciation of commercial and industrial buildings will also make a significant difference to investors’ after-tax returns.
For a copy of the Product Disclosure Statement for Centuria NZ Property Fund visit www.centuriainvestments.co.nz. Details on how the forecast pre-tax cash returns are calculated and the risks associated with the investment can be found in the Product Disclosure Statement. Centuria Funds Management (NZ) Limited is the issuer of the units under the offer to which this article relates.