Costa Asset Management has kicked off a non-deal roadshow for a new real estate investment trust. 

As revealed by Street Talk on Tuesday, Bell Potter is in Costa's corner as the company meets with local investors to weigh a transaction.

The REIT would have a valuation of $250 million to $300 million, including debt.

Costa Asset Management is chaired by Robert Costa, who co-founded ASX-listed Costa Group with his brother and former Geelong Football Club chairman Frank Costa .

The properties leased to Costa Group include blueberry and raspberry farms in the coastal northern New South Wales town of Corindi; blueberries in Tumbarumba, blueberries, raspberries and blackberries near Devonport, northern Tasmania; and citrus in the Riverland region of South Australia.

Earlier this year, Costa Asset Management is said to have appointed Kidder Williams to field offers for 14 properties including those operated and leased by Costa Group. Kidder is now said to have a broad advisory role which includes work on the proposed REIT, sources said. 

The leases for the Costa Asset Management farms expire in 2026, with options to renew.  

The  properties also entitle the owner to a fixed rent and a share of earnings from Costa Group's berries and citrus businesses. That means there are variable and fixed revenue components for the REIT's sales. 

Interestingly, when Costa listed on the ASX two years ago, several investors raised concerns about related party transactions between it and privately held Costa Asset Management.

In June, Costa Group chief executive Harry Debney told The Australian Financial Review: "If they did look to sell them, we may or may not be interested in buying them.

"They are not a dominant part of our portfolio, we have in excess of 40 farms."

 

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With the advent of Amazon, retailing is widely considered about as challenging as scaling Mount Everest.

But outdoor clothing and equipment retailer Macpac (the business founded by Jan Cameron, and now majority owned by CHAMP Ventures) is right at home on Everest - and would seem to have little problem tackling the challenging retail market, as well.

As revealed by Street Talk on Tuesday, KPMG Corporate Finance partner Luke Lawrentschuk has been appointed to run a strategic review of Macpac, which includes selling a stake or the business in its entirety.

CHAMP Ventures bought an 85 per cent stake in the business for about $70 million in 2015, when it was making about $10 million earnings before interest, tax, depreciation and amortisation and had 43 stores. The business now has 51 stores, of which 29 are in New Zealand.

Cameron, who co-founded Kathmandu, is understood to still hold a small percentage of the business.

Under CHAMP's stewardship, sources said Macpac is achieving 10 per cent like-for-like store growth and 25-30 per cent online growth, outperforming other general retail and lifestyle brands. 

Macpac is likely to have its fair share of suitors, given it's a brand that you will see at the top of a mountain - the Alex Brandon-led management team and designers work with the New Zealand Alpine Team to get the technical aspects of their products right - as well as at the footy on the weekend or on a bushwalk

KPMG's Lawrentschuk told Street Talk there is the potential to double the store network in Australia, and as a brand, Macpac could go international. Interest is expected to come from local and overseas trade buyers, as well as private equity funds who may consider a secondary buy-out.  

CHAMP's Paul Readdy stressed the brand was aspirational and upmarket, with down and insulated jackets retailing for between $200 and $500.

"Macpac was a high street and destination retail business when we invested but we have since branched out into a specialised shopping mall format"  which has proven to be very successful and opened up new avenues of growth.

"We have also taken a very disciplined approach towards managing our margins with a deliberate strategy of stepping away from the discounting cycle," Readdy added.

In addition to overseeing some investments for CHAMP Ventures which is winding up, Readdy joined forces with George Penklis to launch Odyssey Private Equity earlier this year.

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Stockbroker Wilsons has traded a 14.66 per cent stake in real estate agents McGrath on behalf of former McGrath agents and senior executives, Street Talk can reveal. 

Fund manager sources said the trade of more than 20 million shares was done at 65¢ a share with the stock picked up by about 10 institutions. This was at a discount to the last trading price of about 72¢.  

The block was created by former McGrath director of sales Matt Lahood, and former top Sydney agents Ben Collier, Stephen Chen, Shad Hassen and Brad Gillespie lumping their shares together.

The group's shares became available for purchase last Friday when 46.3 per cent of the shares on issue in McGrath came out of escrow.

More than half of these escrow shares are held by John McGrath who has not commented on whether he would sell down some of his stake. McGrath CEO Cameron Judson said recently that McGrath remained a long-term holder of equity in the company.

 A document filed to the Australian Stock Exchange said each of the parties intended to act in a "co-ordinated manner in relation to any sale of their shares in McGrath Limited".

Lahood, who left McGrath after 20 years to form rival real estate agents The Agency, told the Financial Review last week that selling the shares as a block could achieve a premium price.

However, the price at which the shares were traded suggests it would have been hard for the group to sell their stock at anywhere near the trading price, if sold separately in the open market.

The deal also means activist investor and former Allphones CEO Matthew Donnellan has missed out on acquiring what would have been the second biggest stake in McGrath behind founder John McGrath, who owns about 27 per cent of the stock. 

Institutional investor Perpetual - a value investor - has a near 10 per cent stake in McGrath.

Donnellan could get a second crack at acquiring a smaller seven per cent stake in McGrath at the end of the month, when shares held by former Sydney franchisee Shane Smollen and other Smollen associates come out of escrow on September 30.

McGrath floated at $2.10 in December 2015 giving the country's third biggest real estate selling business a market cap of $281 million.  

It is currently worth less than $100 million with its calamitous listing a factor of a perceived over-valuation (the shares fell heavily on the first day of trading), tough market conditions especially a drop in listings and sales in Sydney, the loss of some of its best agents from its company-owned offices and two earnings warnings.

John McGrath stepped down as CEO in August 2016, handing the reins of the company to former Chandler Macleod CEO Cameron Judson.

McGrath posted a 42 per cent drop in net profits in the past financial year. The company has kicked off an on-market share buyback program and has $8 million of cash in the bank and no debt.

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Moelis Australia is looking to take advantage of its surging share price to raise $59.7 million  and build up its growth war chest.

The advisory and funds management firm, which has seen its share price rise from an offer price of $2.35 to as high as $5.75 since listing in February,  will raise the funds via a non-underwritten institutional placement of new securities, priced at $5.00 apiece.

According to a term sheet sent to fund managers, the offer price reflects a 12.9 per cent discount to the last close and a 9.7 per cent discount to the five-day volume weighted average price.

Moelis also announced the launch of an unsecured bond issue to raise up to $35 million.The first tranche of notes will have a fixed coupon rate of 5.25 per cent per annum and a term of three years. 

"The bond issue provides Moelis Australia with additional, and non-equity capital to facilitate growth," the term sheet says.

Assuming the equity raising proceeds come to $59.7 million and factoring in the bond issue, "Moelis Australia will have approximately $125 million in cash and cash equivalents and additional investments of approximately $50 million."

The issue of new shares will also help improve the liquidity of the stock; at present 80 per cent of the stock is owned by Moelis Australia's global parent and local bank staff. Chief executive Andrew Pridham owns more than 16 per cent.

The raising was being pitched at sophisticated investors and bids were being called for by midday.

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Macquarie Group will post strong underlying revenue growth in its 2018 year as well as higher performance fees of about $456 million, according to analysts at Morgan Stanley.

The analysts led by Richard Wiles also increased their price target for the stock to $91 from $85.

That came after Macquarie on Monday upgraded its earnings guidance for the six months ended September 30. 

"As a result of stronger performance fees now anticipated to be recognised in the first half, the 1H18 result is expected to be up on 1H17 and broadly in line with 2H17," the presentation to be delivered by finance chief Patrick Upfold said.

Macquarie posted an interim profit last year of $1.1 billion and in the latter half of its year posted income of $1.2 billion. That suggests that 2018 profit will likely exceed the company's often conservative guidance of a result "broadly in line" with 2017's $2.2 billion. 

Morgan Stanley now expects profit for Macquarie's 2018 year, ended March 31, to print at a record $2.3 billion.  

"While we retain our view that it will be challenging to repeat last year's ~$1.4 billion of "lumpy" items, we've upgraded our FY18 estimate to ~$1.2 billion from ~$1 billion to reflect stronger performance fees," the analysts said in a note to clients. 

"Net 'lumpy' revenue items averaged ~$500 million per annum in the five years to 2014, but have been closer to ~$1 billion over the past three years. On performance fees, we now target $456 million in FY18, up from $264 million in FY17.

"We estimate operating revenues ex 'lumpy' items grew ~10 per cent in FY15 and FY16 but fell ~4 per cent in FY17. We now forecast ~6 per cent growth in FY18."

Morgan Stanley did, however, maintain its "equal-weight" rating on Macquarie.

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