In the bag – Augusta’s latest syndication

Augusta Funds Management is launching a new proportionate ownership scheme – Carter Holt Harvey’s bag manufacturing depot at 33 Hugo Johnston Dr, Penrose, Auckland.

Augusta has signed an agreement to buy the land and buildings and has prepared an investment statement with a projected initial annual cash return of 9% before tax.

There are 192 proportionate shares on offer at $50,000 each for a beneficial interest in the freehold title.

Bayleys is marketing the offer and applications close on May 24.

The offer is underwritten by Augusta Funds Management’s parent company, listed Augusta Capital, “which gives investors certainty that the offer will proceed”, the company says.

The sell-down is being managed by Bayleys head of syndication Mike Houlker.

The offer is the latest in a series of proportionate ownership schemes set up established by Augusta Funds, including Countdown supermarket properties and ASB Bank’s national support centre in Auckland.

Augusta Funds will manage the property as part of its $300 million portfolio.

“The Carter Holt Harvey bag division manufacturing plant syndication presents an opportunity for smaller investors to be involved in a significant commercial property investment,” according to Chris Francis, managing director of Augusta Funds.

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, 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% a year before tax in the first year with the rent review structure providing scope for growth in the long-term,” Mr Francis says.

The property, valued at $14.65 million, would be purchased for a total of $14.2 million. The syndication investors would put forward a total of $9.6 million, with the balance funded by a first mortgage loan.

Mr Houlker says Carter Holt Harvey’s industrial complex was in a sought-after location on a 3.24ha site in the Penrose industrial precinct.

The property includes air-conditioned offices, a laboratory and a sprinkler protected warehouse/factory. The factory manufactures approximately 100 million bags a year and is the main supplier of multi-ply paper sacks in New Zealand. It also exports significant volumes to Australia and Latin America.

The bag division operates an industrial plant focused on cement, non-food products, a hygiene facility where milk powder, flour and other food bags are manufactured.