Augusta Capital confirms loss of PIE status

Augusta Capital [NZX: AUG], the listed property investor and fund manager, will lose its Portfolio Investment Entity (PIE) status from July 1 because the value of its funds management subsidiary has grown beyond the threshold of 10% of total assets.

The Auckland-based company, which last month gained a Financial Markets Conduct Authority licence as a manager of investment schemes covering property syndicates and managed funds, said its funds management business was valued at between $28 million and $34.8 million by PwC. It didn't give an update of its total assets.

As a result of losing PIE status, Augusta will have to withhold tax from dividend payments to New Zealand resident shareholders at a rate of up to 33%, rather than the current maximum 28% allowed under the PIE rules. A PIE is a special tax investment entity that allows payments to be passed on to shareholders at Augusta's corporate tax rate if there are insufficient imputations credits available.

Based on the current annual dividend of 5c  a share, the net effective dividend under the non-PIE regime would be 4.64c, Augusta said. If the PwC valuation was included Augusta's financial statements, its net asset value would increase to a range of $1.05 to $1.12, which would be up from the reported NTA of 89c on September 30.

"We made the strategic call some time ago that the company's growth would come from the funds management division and this strategy has proved successful," managing director Mark Francis said. "Loss of PIE status was always going to be a consequence of this and this was well signalled to the market some time ago." It was "a consequence of our own success."

Funds management generated net revenue of about $4.6 million in Augusta's first half, ahead of the $3.3 million garnered from investment property.

Augusta faces a five-year stand down period from being a PIE effective from July 1, it said. The company would monitor opportunities to regain that status, it said.

Augusta shares fell 0.5% to $1.015 and have slipped 0.5% in the past 12 months while the NZX 15 index gained about 13%.

(BusinessDesk)