24 Mar 2014

Augusta's deal gets thumbs up

7:13 am on 24 March 2014

One of Augusta Capital's largest shareholders is applauding the deal to buy KCL Property which will take its syndicated property funds under management to $1.2 billion.

The company will be managing about 170 properties.

Augusta, which currently has $350 million in funds under management, is paying $15 million for KCL, $10 million in cash and the rest in shares.

The shares, issued at 80 cents each and accounting for just over 7 percent of Augusta, will be issued to two KCL shareholders, Bryce Barnett and Phil Hinton, who will also join Augusta's management team.

Augusta is also buying Investment Property Titles from the real estate firm Bayleys for $444,000 and Augusta is also forming a strategic alliance with Bayleys which will see the third KCL shareholder, Cheryl Macaulay, join Bayleys.

Matthew Goodson at Salt Funds Management, which earlier this month announced it had lifted its stake in Augusta to 10.4 percent from 9.4 percent, says he thinks the purchase is a positive development.

He says Augusta has successfully built up its own syndication business and it has 350 million properties under management, while KCL is a well respected, long established syndicated property firm.

Shareholders will see a reasonably immediate benefit from the KCL purchase.

Augusta plans to lift its annual cash dividend to 5 cents per share from 4 cents currently from the June quarter dividend which will be paid in August.

Augusta managing director Mark Francis says the purchase will mean an immediate lift in per share earnings.

He says a lot of economies flow from the transaction, which is primarily what is driving the extra earnings per share.

"The thing with the KCL business is they do have a number of revenue sources, revenue streams, that we don't, so if you overlay those with the efficiencies that you get from putting the two businesses together and that delivers additional cash per share."