Stride Property Ltd began a series of actions last Thursday which will culminate in the NZX-listed company splitting into 2 stapled securities – one property, the other management – and following this with the listing of a separate investor in large-format retail property, which the Stride manager will run.
Stride called a shareholder meeting for Thursday 30 June (Rydges Auckland at 9am) to approve its move to stapled securities. The 2 stapled companies will have the same boards and will be managed by staff who are all now employed by the management company.
Also last Thursday, Stride signed up through a subsidiary to buy an NZ portfolio of 14 Countdown supermarkets for $267.4 million from Shopping Centres Australasia (SCA Property Group), which at that point had a portfolio of 88 properties across the 2 countries.
This separate property buyer, Investore Property Ltd, was a Stride subsidiary called Stride LFR Ltd until last Friday, and under that name was the buyer last November of a portfolio of 19 Countdown supermarkets from the Pears Group of the UK’s Antipodean Supermarkets Ltd & Antipodean Properties Ltd for $287 million.
Diversified NZ Property Fund Ltd, managed by Stride, bought 2 Westfield malls last November from Scentre Ltd, Queensgate in Lower Hutt & Chartwell in Hamilton, for $445 million. In the present restructure, Diversified’s portfolio has been transferred to the new Diversified NZ Property Trust and will grow to $550 million, and the new company, Investore, will hold a $641 million portfolio of 39 properties – the 14 new acquisitions, the 19 supermarkets bought last November, and 6 others sold by Stride to its subsidiary since April.
Stride will retain 19.9% of Investore and will seek $150-185 million in an IPO (initial public offering, except there won’t be any shares available for the public outside brokers’ stocks). Investore lodged a product disclosure statement for the IPO on Friday. Those shares have been valued in a range of $139.5-204.5 million, and the indicative price range for the IPO is $1.37-1.49/share.
Goldman Sachs NZ Ltd has been appointed as sole arranger, bookrunner & lead manager for the offer and acted as financial advisor for the demerger & restructuring. Deutsche Craigs Ltd & Forsyth Barr Ltd have been appointed co-managers for the offer.
Stride’s existing shares will stop being quoted on Monday 11 July and the shares in Stride Investment Management Ltd will be listed the next day. For every share in Stride, shareholders will get a share in the manager, and they’ll be stapled so they can’t be sold separately.
Stride shareholders will also get one Investore share for every 4 existing Stride shares, and will initially hold 33.4-38.2% of Investore.
The vendor of Investore’s new assets, Shopping Centres Australasia (SCA Property Group), is an internally managed, ASX-listed real estate investment trust (reit) owning a portfolio of quality sub-regional & neighbourhood shopping centres & freestanding retail assets focused on convenience retailing in Australia & New Zealand.
The agreed sale price for the 14 New Zealand centres, $NZ267.4 million, represents a cap rate of 6.6% and a premium of 6.5% to the 31 December 2015 book value of the assets.
SCP will use the funds to cut its gearing to 25%. Chief executive Anthony Mellowes said: “We are very pleased to have achieved an attractive sale price for our NZ portfolio. Since listing in December 2012, these assets have delivered an unlevered pretax $NZ return of 14%/year for SCP. At the sale price, the after-tax yield on the NZ assets is less than 6%, so we believe that exiting New Zealand and reinvesting into core Australian assets will maximise value for SCP unitholders.”
Stride is buying the 14 supermarket Countdown portfolio from SCP’s New Zealand arm, Shopping Centres Australasia Property Group Trustee NZ Ltd. All are leased to Countdown operator General Distributors Ltd.
Stride expects the transaction to become unconditional on 30 June and to complete the acquisition in 2 tranches in July & September.
Stride chair Tim Storey said Investore’s portfolio of 39 properties had a weighted average lease term of 14.8 years, a total value of $641.4 million, and the company was expected to deliver an implied cash dividend yield of 5.1-5.3%, and implied gross dividend yield of 7.6-8.0%, based on forecast financial information for the March 2018 year.
Growth of the funds management business as a part of Stride meant it had been likely to lose its tax status as a PIE (portfolio investment entity). Through the restructure & IPO, Stride will retain that status and Investore will acquire PIE status.
Stride Property – Investore IPO & restructuring update – 100616
Stride Property – Notice of special meeting of shareholders & explanatory memorandum
Stride Property – Variation proposal & restructuring presentation
Investore Property Ltd presentation
1 June 2016: Stride profit hike translates into small shareholder gain, new stapled structure on way
27 November 2015: Scentre sells 3 malls to locals, one to go
9 November 2015: One Countdown portfolio settlement to go for Stride
24 July 2015: DNZ looks to grow investment management as first Westgate project nears completion
Attribution: Company releases.