Shopping centre deal teeters
Covid-19 looks like killing a big commercial property deal.
Property company Argosy said the buyer of its Albany shopping centre had failed to settle the $89 million purchase.
The purchaser, Cook Property Group, had not settled on March 30 for the Albany Lifestyle Centre in Auckland. Cook Property Group is a privately held group of companies, founded and controlled by Ben Cook.
Argosy chief executive Peter Mence said Argosy had issued a notice of settlement to Cook Property, saying the buyer had not honoured the contract, was in default and had 12 days to remedy that. If Cook did not settle in 12 days it would lose the deposit.
Argosy had received a $4.5m non-refundable deposit from Cook Property.
Mence did not want to talk about other options available to Argosy if Cook did not settle in 12 days because they were not at that point yet and that could be prejudicial to its options.
From Argosy’s perspective the purchaser was Cook Property, the holder of the contract. Cook Property had nominated Augusta Funds Management as its purchaser.
The property was intended to be part of the Augusta Property Fund but last week Augusta withdrew its offer of units in the fund to investors in light of the Covid-19 lockdown and the impact on a number of tenants in the properties in the fund.
Investors taking up the units were to receive their money back. Albany Lifestyle Centre and Anglesea Medical Centre in Hamilton were to have been the first property assets in the fund.
Augusta was expecting that tenants in the properties would seek and be entitled to rental relief and the Augusta board considered that representations in the Augusta
Property Fund’s disclosure statement were no longer correct.
Meanwhile, Argosy, with about $1.7 billion of property, reassured its shareholders of its rental income and said its properties were diverse and its business was strong and underpinned by Government and essential services tenants.
But the short-term impact, excluding the Albany Lifestyle Centre, was a potential reduction in income in the 2021 financial year of $5m to $8m.
It said that just over a quarter – 26 per cent – of its rental income was from Government tenants, providing a high degree of future rental certainty. Just over two-thirds of those tenants were Government agencies providing essential services.
In addition a further 42 per cent of tenants by rental income were involved in providing essential services and were operating at various levels during the lockdown.
The return to allowing depreciation on commercial property would increase income by about $2.7m and interest savings would add another $1.6m of income.
As well, the Albany Lifestyle Centre would still bring in rental income.
The company was comfortable with the business overall and reaffirmed its guidance of 6.35 cents a share dividend for the 2020 financial year with the fourth quarter dividend to be paid in June.
‘‘While there is a lot of volatility and uncertainty in the market, we are confident in the resilience of our business and the quality of our diversified portfolio,’’ Mence said.
‘‘We acknowledge that the effect of Covid-19 will be negative for the economy generally, however we will be working hard to minimise the impact on Argosy’s business. We have strong relationships with tenants and continue to work closely with them.’’