Centuria Capital has finalised a new deal to help bail out Augusta Capital from its COVID19 issues, taking a 19.9% stake in the Group.
Augusta has indicated that its business has been significantly impacted by COVID19. It has been unable to settle on the Albany Lifestyle Centre which resulted in the loss of the $4.5 million deposit already paid and it has been unable to launch the Augusta Tourism Fund leaving vulnerable assets on its balance sheet (which are now not income producing) and reduced the potential earnings from the new fund. Overall it expects FY2020 net revenue to be reduced by $12.7 million against the prior financial year with overheads broadly in line.
To overcome their woes, Augusta are undertaking a NZD $45 million equity raising to pay down debt facilities, strengthen its balance sheet and provide capital for new opportunities. The fundraising consists of a $12.4 million Placement and a $32.6 million Entitlement Offer.
The latest deal follows Centuria's proposal in late January to acquire the REIT at $2.00 per unit. Since then the stock has plummeted to $0.80 per unit due to COVID19 issues. Centuria will now participate in the equity raising which is priced at $0.55 per unit with an investment of circa $22M, providing it with an initial 19% interest in Augusta Capital Limited with an opportunity to increase its holdings to 24.99%.
Approximately $17m of the proceeds will be used to repay debt facilities (otherwise effectively in default) with $26m retained in cash to support repayment of the remaining $15m of debt if required, to fund the business and other potential opportunities.
Ass part of this deal, Augusta has received approval from its existing lender for a relief package including a relaxation of the LVR covenant on the Investment Facility and waivers of all other financial covenants on available existing facilities up until 31 March 2021.
John McBain, Centuria’s Joint CEO, stated, “We believe Centuria’s investment in Augusta represents a unique opportunity to develop a strong presence in the New Zealand funds management arena. We remain attracted to Augusta’s leading position in New Zealand, its strong distribution platform and its fund origination capability. This is a long-term investment in the Augusta management team, led by Mark Francis, and the transaction has occurred with the support of the Augusta board and management team.”
The acquisition is Centuria’s first foray into an offshore market and a sign of confidence in New Zealand’s commercial real estate sector, with a mid-to-long-term outlook. Augusta is one of New Zealand’s leading listed real estate funds management businesses, managing NZD $1.8 billion (AUD $1.7 billion) in assets across a range of listed, unlisted and private funds.
Jason Huljich, Centuria’s Joint CEO, added, “Augusta has impressive growth credentials and we believe that as COVID-19 conditions unwind we need to look to the future and believe Australasian markets will provide excellent opportunities for experienced and nimble managers such as Centuria and Augusta.”
Centuria’s maximum potential commitment to the Offer is approximately NZD $23.6 million (AUD $22.3 million), funded by its cash reserves. Post-transaction, Centuria’s cash reserves will be circa AUD $120 million. The transaction will see Centuria appointing a Director to Augusta’s board after allotment of the Retail Entitlement securities.
Centuria’s FY20 Operating NPAT guidance is maintained at 11.5cps and FY20 distribution guidance remains 9.7cps.
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