Stride Property will list its wholly-owned subsidiary Investore Property after an initial public offering as part of its strategy to retain its portfolio investment entity (PIE) tax status.
Stride will distribute Investore shares to its own shareholders at a one-for-four ratio, at the same time as Investore lists on the NZX main board, it said in a statement. Stride will retain a 19.9 per cent stake in Investore, while Stride shareholders will collectively hold 33.4 per cent to 38.2 per cent.
In May, Stride proposed splitting its property-owning unit from its real estate investment management in a stapled structure, with each as a separate legal entity but effectively operating in lock-step, allowing it to expand the management arm while preserving its favourable tax status.
Chief executive Peter Alexander told BusinessDesk the proposed stapled structure would still go ahead, and the Investore demerger and listing was a step in Stride keeping its PIE tax status, which allows tax payments to be passed on to shareholders at the company's corporate tax rate if there are insufficient imputations credits available. Companies only qualify for PIE status if they come within a cap on non-qualifying income.
Stride had 59 properties worth $1.27 billion as of March 31, and Investore's portfolio was a percentage of that, Alexander said.
"We are still left with a substantial property portfolio," he said.
"The increase we have had in investment management income would mean we would have too much non-qualifying income. Instead of owning this property through a fully-owned subsidiary we will have a cornerstone stake in Investore."
Investore will have a portfolio of 39 large format retail properties, including 14 Countdown stores it intends to acquire from Shopping Centres Australasia Property Group for $267 million. That acquisition is subject to a successful capital raising and demerging of Investore from Stride, and the company expects it to become unconditional on June 30.
The remaining 25 properties are standalone large format retail shops such as supermarkets and hardware stores, located around New Zealand, and they share characteristics such as long-weighted average lease terms, Alexander said.
Stride shares closed at $2.265, up 4c, and have gained 5 per cent this year. The company sold shares at 97c in a $45 million capital raising when it listed in 2010, using the funds to internalise its management contract and corporatise its structure.