Stride Property Group has entered an industrial portfolio joint venture with JP Morgan Asset Management, called Industre.
Stride set out initial steps to put the venture in place today, but the actual start will rely on Overseas Investment Office approval plus tying up a few other loose ends such as amending banking arrangements. The conditions are to be satisfied within 9 months, subject to an extension to 12 months in the case of the OIO approval condition in certain circumstances.
The venture starts with 11 of Stride’s industrial properties and Stride ownership at 70%, through new subsidiary Stride Industrial Property Ltd.
The first addition will be the new headquarters Stride is developing for Waste Management Ltd at Springs Rd, East Tamaki, due for completion at Christmas, and Stride will nominate Industre as buyer of the $8 million 439 Rosebank Rd, Avondale, which is due for completion next June.
Also in the pipeline is The Concourse at Henderson, a 4ha industrial property Stride signed up to buy last December for $35 million.
Stride will sell the first batch to Industre for $256.9 million, 3.1% up on the March valuation.
JP Morgan will contribute an initial $50 million of equity, then $20 million for the East Tamaki property (current expected value on practical completion is $70.71 million).
Different structure from Investore
Industre comes in a different vein from Investore Property Ltd, the owner of a portfolio of bulk retail outlets Stride listed in 2016. Stride launched Investore to retail investors, but retained a 19.9% stake. For Industre, for the moment at least, there’s no NZX listing. In that respect, Industre is like Stride’s oldest fund, the Diversified NZ Property Trust, but the partnership with JP Morgan & other international investors is different.
Stride chief executive Philip Littlewood said today: “Our vision is to grow a significant portfolio of high quality industrial properties, and we see a great future in this space. Initially, Industre Property will have funding capacity for an additional $190 million of acquisitions & developments over the short term, potentially taking the industrial portfolio’s initial value to about $550 million.”
JP Morgan to ramp up stake
On top of its opening $70 million, JPMAM has allocated $115 million of capital to fund near-term growth initiatives, subject to meeting certain investment return & approval thresholds.
“Over the long term, the strategy is for JPMAM to fund further portfolio growth until the respective shareholdings in the portfolio are 75% JP Morgan/25% Stride,” Mr Littlewood said.
The JP Morgan investment will result in Stride’s loan:value ratio falling to about 24%. Mr Littlewood commented: “We plan to use our funding capacity to support our investment products, and to grow our office portfolio in the near term to build up our direct investment in that sector.”
30 August 2019: Stride talks up new fund again
12 September 2018: Stride outlines plans for commercial property funds
13 June 2016: Stride unveils stapled structure & Investore IPO