360 Capital take 50% interest in NZ’s PMG Funds Business

19 February 2021

In line with 360 Capital REIT’s refined strategy, the trust has acquired a 50.0% interest in PMG Funds, a leading NZ based real estate fund manager with over NZ$665million of real estate Funds Under Management.

The NZ$17.5 million equity partnership has been structured as cash of NZ$13.3 million and a potential earn-out of NZ$4.2 million over a period of two years based on key financial milestones.

The partnership gives 360 Capital REIT (“TOT”) exposure to a growing funds management platform across New Zealand and access to on ground management expertise to enable TOT to invest in direct commercial and industrial real estate transactions in New Zealand. Furthermore, TOT will support the growth of the PMG’s funds management platform through an underwriting facility at market rates.

As part of the transaction, TOT has committed to a NZ$10 million underwriting position for the acquisition of NZ$108.1 million of commercial and industrial assets across New Zealand for one of PMG’s funds.

Head of Real Assets, James Storey said “In line with TOT’s refined equity strategy, this investment provides TOT with exposure to a growing real estate investment platform and the opportunity to invest in direct real estate assets along with underwriting the growth of the PMG platform. TOT remains well capitalised with no gearing and a focus on growing 360 Capital’s real estate strategy”

Our Views

360 Capital haven’t provided any information to assess whether the deal is good for unit holders or not. There is no information on the profitability of PMG and whether the acquisition represents good value.

Assuming PMG make a minimum of 50bps on the FUM, the annual income to the business would be $3.3m. Assuming a 65% cost to income ratio, net income before tax may be $1.16m and a 50% share of these proceeds would reflect a yield of circa 4.4% return on the $13.3m of NZ cash spent on the acquisition.

TOT are not on our recommend list.