Retail & industrial portfolio owner & manager Stride Property Group saw revaluations slash its 2020 profit by over $50 million, but the group has continued to pay dividends, forecasts similar returns to shareholders for 2021 and – the big change factor – has over $500 million of investment funding available.
Stride chair Tim Storey said the group had progressed with its strategy of establishing a group of products in specific commercial property sectors to provide growth in its investment management business, including the announcement of the Industre Property joint venture, which he expects to start operations on 30 June.
Fourth-quarter dividends from each company, to be paid on 8 July, are Stride Property Ltd 2.1575c/share, Stride Investment Management 0.32c/share. That takes the total combined cash dividend for Stride Property Group for the year to 9.91c/share, in line with guidance.
The dividend reinvestment plan remains suspended for the fourth quarter dividends.
Covid-19 has introduced uncertainty for the outlook for the year to March 2021, but the group’s boards confirmed that they intend to pay quarterly dividends in line with current policy, and anticipate that the combined dividends will again be 9.91c/share.
The group’s balance sheet also provides considerable scope for optimism. Mr Storey said: “The group has $520 million of committed funding for Stride & its managed entities to invest in new portfolio opportunities, in addition to current committed acquisitions & developments.
“When combined with Stride’s current assets under management of $2.2 billion, this provides a pathway to grow Stride’s investment management business to about $2.8 billion.”
- Stride Property has banking facility headroom of over $218 million
- Investore has banking facility headroom of $148 million
- Industre (the new fund) has access to additional committed capital of $154 million.
A stapled security of the Stride Property Group comprises one share in portfolio owner Stride Property Ltd & one in portfolio manager Stride Investment Management Ltd.
Stride Investment Management manages the group’s property portfolios – the Diversified NZ Property Trust & NZX-listed Investore Property Ltd, which owns large format retail assets.
The group’s decline in profit was attributed to:
- a 105% ($38.3 million) fall in property value movements, from a $36.5 million gain last year to a $1.76 million reduction this year
- a 47.2% decline in its share of profit in associates, from $6.6 million to $3.5 million
- ineffectiveness of cashflow hedges, resulting in an $8.22 million cost this year versus no impact last year, and
- a $2 million impairment of work in progress (no impact last year).
Key financial points for the last year (March 2019 in brackets, and some other figures in brackets):
Net rental income, up 3.1% to $59.1 million ($57.3 million)
Management fee income, up 16.4% to $18.28 million ($15.7 million)
Pretax profit, down 64.8% ($52.7 million) to $28.7 million ($81.4 million)
After-tax profit, down 66.8% ($50.9 million) to $25.3 million ($76.2 million)
Distributable profit (a non-GAAP financial measure adjusted for determined non-recurring &/or non-cash items, among other differences) after current income tax, down 2.8% to $37.7 million ($38.8 million) or 10.32c/share (10.62c/share)
Net change in fair value of investment properties, down 104.8% to a fall of $1.76 million (up $36.5 million), attributed largely to material valuation uncertainty due to Covid-19
Total comprehensive income after tax, down 58.9% to $29.4 million ($72.77 million)
Net tangible assets/share, down 0.5% to $1.91 ($1.92), which doesn’t include Stride Investment Management’s contracts
Basic earnings/share, down 66.8% to 6.93c (20.86c)
Diluted earnings/share, down 66.8% to 6.91c (20.81c)
Among shifts in assets, Stride had $35.4 million of development property at March 2019 (none this year), investment properties marked for sale up from $50 million to $132.2 million, a current investment property portfolio up from $880.7 million to $891.4 million, total assets up 6.9% to $1.15 billion ($1.08 billion).
The group’s loan:value ratio was 39.1% at balance date (34.4% in 2019), but reducing to 17.8% on a pro forma basis this year, as if the following transactions had completed as at 31 March: the sale of 3 large format retail properties to Investore Property Ltd; the refinancing of $135 million of bank facilities for 3 years announced on 1 May; the subscription by Stride Property for $16.5 million of additional shares in Investore’s capital-raising announced on 29 April; and the commencement of the Industre Property joint venture, including the expected cost of breaking $120 million of interest rate derivatives at an estimated cost of $9.4 million based on the market value of these derivatives as at 31 May.
The group provided a great amount of detail on its performance yesterday, including leasing & other portfolio changes.
6 June 2020: Stride’s Industre set to launch at end of June
4 May 2020: Stride sees investment capacity despite revaluations
29 April 2020: Stride-Investore deal gets OIO approval, Investore embarks on capital-raising
20 November 2019: Investore raises capital to buy 3 more assets from Stride
Attribution: Company release, annual report.