Thursday 5th September 2019
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Stride Property Group is spinning out its industrial properties into a new special-purpose vehicle in a joint venture with a group of international institutional investors.
Stride is tipping 11 properties into the venture and will add its development at Springs Road in Auckland’s East Tamaki once it is completed. The institutions, who are being advised by JP Morgan Asset Management, will contribute $50 million and then another $20 million to purchase the development, as long as certain conditions are met.
Stride will initially own about 70 percent of the new vehicle, Industre Property, but its stake will be gradually diluted as the institutions contribute a further $115 million towards the acquisition and development of further properties.
Eventually, Stride’s stake in Industre will be diluted down to 25 percent but Stride will continue to manager Industre.
Stride’s base management fees start at 0.4 percent of gross asset value for the first three years before rising to 0.45 percent. It will also collect a range of other fees including a leasing fee of 12 percent of annual gross rent and a capital expenditure and maintenance fee of 6 percent of costs.
Stride’s performance fee will kick in once returns to investors rise above 10 percent per annum and will be capped at 15 percent. Any under- or over-performance will be carried forward for two years before ceasing to be taken into account.
Although the new vehicle won’t be listed on NZX, its establishment is similar to the principles behind Stride’s Investore Property, a listed vehicle established in 2016 as a special-purpose investor in big-box retail properties.
Industre’s portfolio will have a weighting to the Auckland market. “The vision for Industre is to grow a significant portfolio of high-quality New Zealand industrial properties,” Stride says.
Stride says it is looking to create another similar special-purpose vehicle to own commercial properties.
Stride’s 11 industrial properties will be sold to Industre at a 3.1 premium to their March 31 valuations, or $256.9 million.
Industrie will target long-term returns on equity of 8 percent with an initial yield of 5 percent.
Its investment mandate specifically excludes office properties, large-format retail, shopping centras and self-storage facilities.
Stride stapled securities are trading at $2.34, down 1 cent today, but have risen nearly 22 percent year-to-date.
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