Stride Property Ltd entered into a conditional agreement yesterday to sell 3 large format retail properties to Investore Property Ltd for $140.75 million.
Stride owns 19.9% of Investore and manages its portfolio.
The transaction entails a capital-raising by Investore, in which Stride is participating to maintain its stake.
Investore completed a $65 million placement of new shares yesterday at $1.75/share and will follow that with a $15 million retail offer (plus $5 million oversubscriptions). The placement shares will be issued, and the retail offer at the same price will open, next Monday. The retail offer will close on 4 December and trading will open on 10 December.
Northington Partners will provide an independent appraisal report for Investore shareholders, who must approve the transaction at a meeting yet to be set down.
The 3 assets are:
- Mt Roskill, Bunnings
- Mt Wellington Shopping Centre, and
- Tauranga, Bay Central Shopping Centre.
When Stride established Investore in 2016, it said it intended to hold its exposure to large format retail assets through Investore. Stride chair Tim Storey said yesterday this transaction furthered that intention, completing the transfer of Stride’s remaining large format retail assets to Investore.
As part of the sale, Stride has agreed to complete certain seismic strengthening work on the properties, as well as to provide a rental underwrite for up to 2 years on 4 specific specialty tenancies. That underwrite will fall away if the premises are leased to a new tenant.
Mr Storey said the purchase price was in line with the $131.2 million valuation of these assets as at 30 September, which will be included in Stride’s financial statements for the September half-year, to be released next Monday.
Stride’s valuations include allowances for the remaining costs to be incurred on the Briscoes/Rebel expansion at Bay Central Shopping Centre, as well as certain seismic upgrade works. After allowing for the capital works & rental underwrite, Stride estimates the net sale price will be equivalent to Stride’s 30 September valuations.
The transaction remains conditional on Investore completing due diligence, the Investore board approving the transaction, Investore shareholders (other than Stride & its directors) approving the acquisition, and approval from the Overseas Investment Office. Although the timing of settlement remains subject to satisfaction of these conditions, at this stage Stride expects the transaction to settle next April.
Investore has announced a capital raise to support the acquisition, including a placement, and Stride has agreed to subscribe for its proportionate share of the total amount to be raised in the placement, with the intention of maintaining its 19.9% shareholding in Investore immediately after placement shares are issued but before allotment under the retail offer.
Based on Stride’s committed transactions, including the sale of these 3 assets, Stride’s participation in Investore’s capital raise and taking into account the establishment of Industre Property (see link below), Stride expects to have a loan:value ratio below 15%, providing significant balance sheet capacity for Stride to pursue its strategy to grow its directly held portfolio of commercial properties that may be used to establish new investment management products, and to support & grow Stride’s established products.
At settlement of the sale of the 3 properties, Investore’s total assets will grow to $891 million. At that time, based on current values and assuming Industre Property has commenced, Stride’s aggregate external assets under management, including Investore, Industre Property & Diversified NZ Property Trust, will exceed $1.7 billion, representing growth in excess of $450 million since 31 March 2019.
5 September 2019: Stride creates new portfolio owner Industre in partnership with JP Morgan
2 March 2018: Stride’s 3-property sale to Investore settles
13 July 2016: Stride stapled securities & Investore start trading
13 June 2016: Stride unveils stapled structure & Investore IPO
Attribution: Stride & Investore releases.