Augusta's latest property syndicate is a whopper but it's not for everyone

Augusta Funds Management (part of NZX-listed Augusta Capital) has launched what is believed to be this country’s biggest ever property syndicate, the Augusta Value-Add Fund No.1 Limited.

The syndicate will acquire three office buildings and two industrial buildings in Auckland, and will have a minimum investment amount of $200,000.

It is unusual compared to most other property syndicates that have come onto the market recently, in terms of its size, structure and the type of investors it is targeting.

Most syndication schemes own a single property but the Value-Add scheme will own five properties with a combined value of $111.8 million.

It is being structured as an unlisted, limited liability company in which investors will buy shares.

This was once a common structure for syndications but is more unusual these days, with most new syndicates being structured as proportionate ownership schemes.

It will also have a fixed term, whereas most syndicates are open ended with no wind up date.

But the Value-Add syndicate will be wound up after five years, although the term may be extended by a further year by special resolution of shareholders.

Although that gives investors some certainty around how long their capital will be tied up for, it could also have tax implications for any capital gains that are made when the buildings are sold and surplus funds distributed to investors.

While most syndicates have been aimed at so-called mum and dad investors and typically require a minimum investment of $20,000 to $50,000, the Value-Add scheme will be restricted to wholesale investors and have a minimum investment requirement of $200,000.

In general terms this will restrict investment in the scheme to institutional investors or experienced, high net worth individuals.

Because the scheme is not being promoted to the general public it will also be exempt from the need to provide a prospectus.

Like most of Augusta’s property syndicates, shares in the Value-Add scheme will be sold down through Bayleys Real Estate.

The five buildings being acquired will be purchased for $109.3 million with BNZ providing $65 million in funding ($55 million towards the purchase price and a second tranche of $10 for planned building refurbishments) with the rest to come from investors.

 The five properties being purchased by the scheme are:

  • 151 Victoria St West, Auckland CBD. A five level, 4777 square metre office building leased to NZ Post until 2022.
  • 36 Kitchener St, Auckland CBD. A 16 level, 3252 square metre office tower on individual strata titles.This may be converted to apartments, student accommodation or a hotel.
  • 54 Cook St, Auckland CBD. A four level office building on the corner of Nelson St. The building will shortly become vacant and will be refurbished.
  • 100 Carbine Rd, Mt Wellington. A 29,526 square metre warehouse on a 4.48ha site, which is sub-leased  to Bunnings.
  • 11 MacDonald St, Morningside. An 8551 square metre industrial complex of seven connected buildings occupied by eight different tenants.          

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