Augusta founder Mark Francis outlines thinking on NPT

Augusta's Mark Francis talks about NPT's future. Photo/Greg Bowker

"Part of NPT's problem is that it's sub-scale" - Mark Francis

Shareholders in $102 million listed property specialist NPT reacted angrily to a $230m proposal from Kiwi Property Group on Friday, instead backing biggest shareholder Augusta Capital's plans.

They voted to sack NPT directors and voted in Paul Duffy, Allen Bollard and Bruce Cotterill.

Mark Francis, Augusta's founder and managing director, gives his views on the business his company has an 18.85 per cent stake in.

What is Augusta Capital's broad plan for NPT?
"We have not at this point been given a mandate to mange the business, although obviously we and others believe we are best placed to do so.

"We defeated the Kiwi proposal on one key theme: NPT has been a poor performer for a long time but it's not a company in crisis.

"It doesn't need a wholesale equity raise to bail it out or to restore its balance sheet, what it needs is the right people to realise the underlying value that exists within its current portfolio."

Will you change the CEO and if so, who do you plan to appoint?
"It's totally the new board's call as to who are the right personnel to run the business but what came out clearly at the meeting from all quarters was that the company needed change at a board and management level."

How will Augusta's involvement lead to value gains for NPT shareholders?
As a nearly 20 per cent NPT shareholder, no one is more motivated than us to see shareholder gains. Aside from our stake in the company we obviously bring a wealth of skill and experience in commercial real estate of our own and have a well documented history of turning around under performing assets.

We are NZ's largest property fund manager with $1.7b in real estate across NZ and Aussie. You don't get to that position by accident."

Please quantify that in terms of combined returns, potential share price rise, profit projections?
"It's too soon but simply by externalising the NPT management to Augusta we can run the business for a lot less cost than the current overhead and deliver an immediate earnings uplift of about 7 per cent to 9 per cent without asking shareholders for any money."

Do you plan to at some point a proposal that Augusta and NPT become one business?
"No. That is not in our current thinking."

When will Augusta hold the EGM [extraordinary general meeting] to seek to buy the management contract?
"That's a decision for the new board. They need to be amenable to our proposal and want to recommend it to shareholders."

How much will you pay for that management contract, is it in the $2m-3m range indicated at the meeting on Friday?
"It will depend on the terms, fees and tenure of the contract but obviously it needs to work for both parties and will need to be deemed a fair deal for NPT by an independent appraiser."

Does NPT need to expand, and if so what's your plan on that front?
"Everyone acknowledges that part of NPT's problem is that it's sub-scale. However it's not the only problem and it's certainly not a problem you try to fix when the share price is so weak.

"So yes, we do think the company needs to grow but you grow a company when it's equity is valued fairly, not when it's trading at a large discount."

What's the relationship going to be like with ANZ and Salt, after the acrimonious events?
"We have great relationships with both ANZ and Salt and have done for years. They have both been on Augusta's register in some shape or form for over a decade and we talk to them regularly."

How much will you charge to manage NPT annually in dollar terms?
"This depends on what's agreed with the NPT board but it will be certainly less than the cost of running the business."