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Stride Property Ltd & Stride Investment Management Ltd (NZX: SPG) Office Fund Established and Conditional Acquisition

Monday 13th September 2021

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Stride Property Limited (SPL) and Stride Investment Management Limited (SIML) (together with SPL, Stride Property Group or Stride) today announces an intention to establish a new office fund. This will take place by way of a demerger and NZX listing of SPL's wholly-owned Fabric Property Limited (Fabric).

The demerger and NZX listing will be conditional upon completion of an initial public offering (IPO) of ordinary shares that is being undertaken by Fabric. Fabric intends to lodge a Product Disclosure Statement in respect of the IPO today.

SIML is also pleased to announce the appointment of Jessica Rod as Fund Manager – Fabric.

Establishment and demerger of Fabric

SPL established Fabric as a subsidiary in November 2020 to invest in commercial office property in New Zealand, primarily located in Auckland and Wellington.

The name Fabric represents the concept that an office building is more than its physical characteristics; office space helps to form the “fabric” of an organisation’s identity and culture and is where people connect and collaborate, creating more than the sum of the parts. Offices also form part of the fabric of communities and cities.

SPL proposes to distribute ordinary shares in Fabric to shareholders of Stride on a pro rata basis (based on a 1 for 4 ratio) for no consideration so that existing Stride shareholders will hold approximately 24.8% to 25.8% of Fabric upon completion of the IPO. Stride shareholders as at 5pm on 4 October 2021 will be eligible to participate in the demerger.

The demerger will occur at the same time as completion of the IPO and will result in Fabric becoming a separately listed company on the NZX Main Board and ceasing to be a wholly-owned subsidiary of SPL. Fabric has its own Board, which comprises three independent directors and two SIML-appointed directors, which is the same structure as Investore Property Limited, a Stride Product which is NZX listed and has a portfolio of large format retail properties.

Conditional Acquisition of 110 Carlton Gore Road, Newmarket

Fabric has a conditional agreement to acquire a property at 110 Carlton Gore Road, Newmarket, Auckland, from Mansons CGR Limited, for a purchase price of $217.5 million, representing a contract yield of 5.0% on completion. The purchase price is subject to adjustment following a final rentable area survey of the building on completion.

This property is under development and is expected to be completed in February 2023, at which time (and if unconditional) Fabric will settle the acquisition. If the building has not been completed by 28 February 2024, then the acquisition can be terminated (subject to certain extensions of this date in the event of damage to the property or similar).

To receive a return on funds committed during the development period, Fabric will fund the development of the property through a loan of up to $186.5 million that it will make in stages during the development, and the vendor will pay interest on the amount outstanding at a rate equivalent to the contract yield, with the loan amount to be set off against the purchase price on settlement.

This acquisition remains conditional on successful completion of the IPO, the vendor entering into an unconditional agreement to lease with a third party tenant for not less than 2,500sqm (this will mean the building will be approximately 41% leased), and an executed deed of impartiality between the vendor, Fabric and the vendor’s architect. Settlement will only occur if there are third party leases in place delivering at least 60% of the total net rent of the property, including a shared space operator. The vendor has committed to take a lease of any remaining vacant space at settlement in accordance with commercial terms agreed between the parties.

Please see the links below for details

SPG - Office Fund Established, Conditional Acquisition and Fund Manager Appointed- 130921.pdf

Stride Property Group - Office Fund Demerger and IPO Presentation - 130921.pdf

Stride Property Group - Corporate Action Notice - 130921.pdf

Source: Stride Property Ltd & Stride Investment Management Ltd

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