One of New Zealand’s largest private healthcare centres which is home to 28 tenants, including many of the Waikato’s major private medical providers, is the first asset in a property fund that Augusta Funds Management is relaunching to the market.
Located on a 2.4 hectare site in Hamilton’s CBD, the Anglesea Medical Centre has been unconditionally purchased for $55 million for the Augusta Property Fund.
“The prospects for the New Zealand medical and healthcare property sector remain attractive,” says Augusta managing director Mark Francis. “The economy itself is not the key demand driver for this sector, therefore this type of property presents desirable non-cyclical and defensive characteristics. The healthcare sector is considered well placed to outperform other sub-sectors within the property market.
“The long-term intention of the Augusta Property Fund is to grow and diversify the fund’s portfolio to provide exposure to a variety of property investments within the one investment vehicle.”
The Augusta Property Fund offering encompasses 35,500,000 $1 units available in $1,000 multiples with a $10,000 minimum investment required.
Augusta Funds Management’s parent company NZX-listed Augusta Capital will be the fund’s cornerstone investor, holding a minimum of 10% of the units. Mr Francis says this will align Augusta’s interests with investors and provide a significant incentive to ensure the fund’s strong performance.
The Augusta Property Fund is being marketed by Bayleys Real Estate with an initial forecast pre-tax cash return of 6% per annum, paid monthly.
Bayleys Syndicated Investments manager Samara Phillips says the reinstatement of tax deductions for depreciation of commercial and industrial buildings as part of the government’s recent stimulus package will make a significant difference to investors’ after-tax returns. With the Augusta Property Fund’s PIE (Portfolio Investment Entity) structure, the forecast after-tax return for those on the maximum tax rate of 28% is 5.84%pa for the first financial period ending 31 March 2021 and 5.72% for the following financial year.
Mike Houlker, Bayleys’ head of Syndication & Investment products, says the Anglesea Medical Centre provides value add opportunities through several strategies.
“It is Augusta’s intention to actively engage with tenants to extend or renew leases along with a planned and budgeted capital expenditure programme. Flexible zoning, with building height allowances of 16-20m, and low building coverage of only about 30% of the total site area also provides reconfiguration opportunities.”
Mr Houlker says the Anglesea Medical Centre is located in a prime central Hamilton position on the corners of Anglesea, Tristram and Thackeray Streets.
“A key feature of the property is its many long standing tenants with the largest nine occupants, which account for 66 per cent of the income, having been on site for between 14 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.”
Anglesea Medical Centre encompasses three main buildings with a net lettable area of 12,573 sq m plus 375 carparks. First established as a medical centre in 1992, the property has been incrementally developed over time. The most recent additions include a new café/retail block in 2017 and a pharmacy extension in 2018.
Ms Phillips says demand for private medical services in the Waikato is expected to remain strong driven by continued population and economic growth, constraints on the public health sector and an ageing population.
Mr Francis says the Augusta Property Fund intends to hold a range of property investments providing diversification by property sector, geographic location and tenancy mix. “This aims to mitigate the risks to both capital and cashflow that can be associated with property ownership, an even more important consideration in the current economic environment.
“All future investments, whether directly owned assets or other property investment entities, will be strategically selected for their ability to contribute to the fund’s diversification, yield, capital growth and liquidity.”
The relaunch of the Augusta Property Fund follows the initial offer’s withdrawal in March this year. “The initial offering received strong interest and support from investors but as the impact of New Zealand’s (COVID-19)‘Alert Level Four’ became apparent, the Augusta Funds Management Board decided representations made in the initial Product Disclosure Statement were no longer correct and the offer was withdrawn,” Mr Francis says. “After careful consideration we made the decision to relaunch the Augusta Property Fund offer with Anglesea Medical Centre as the initial asset.”
The relaunch follows the announcement earlier this month that ASX-listed Centuria Capital Group has made a full takeover offer for Augusta Capital. Augusta Capital’s independent directors have unanimously recommended the acquisition to shareholders.
In their introduction to the Augusta Property Fund’s Product Disclosure Statement, Mark Francis and executive director Bryce Barnett say the enlarged group would represent one of Australasia’s largest and leading property funds management platforms with assets under management of A$8.9 billion.
“There is a natural alignment on strategic goals, fund management approach and values between the two organisations. We believe that Centuria will bring added capability that our long standing investors would benefit from. Importantly, investors’ day-to-day relationship with the Augusta team will not change – it’s ‘business as usual’. We (Mark Francis and Bryce Barnett) will continue as employees leading the New Zealand business.”
For a copy of the Product Disclosure Statement for Augusta Property Fund visit augustapropertyfund.co.nz Details on how the forecast cash returns are calculated and the risks associated with the investment can be found in the Product Disclosure Statement.