Stride Property's first-half profit slipped 7 per cent as the property management firm bore the cost of setting up a new industrial property fund and faced a bigger tax bill than the year earlier.

Net profit fell to $37.4 million in the six months ended September 30 from $40.2 million a year earlier. That included a $1.4 million one-off project cost setting up the Industre Property fund with a group of international institutional investors advised by JP Morgan Asset Management. Stride's tax bill was also higher at $7.4 million compared to $3.8 million, reflecting depreciation recovered on a property sale and a year-earlier tax benefit from breaking an interest rate swap.

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Distributable profit declined 1.8 per cent to $19.3 million as the increased tax bill offset increased rental and management fee income, which were up 1.5 per cent at $28.4 million and 25.8 per cent at $9.2 million respectively.

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The board declared a second-quarter dividend of about 2.48 cents per share, payable on Dec. 10 with a Dec. 3 record date.

Stride embarked on the new strategy in 2016, carving out its large format retail properties into a separately listed vehicle - Investore Property - in which it retained a 19.9 per cent stake and which it manages for a fee. It also manages a $485 million property portfolio for the Diversified Property Trust.

More recently, it announced plans to spin out its industrial properties into the Industre fund, to own and develop industrial property for long-term income. Stride's initial stake would be 70 per cent if the deal passes various regulatory approvals, but that is expected to fall to 25 per cent as its partners fund further portfolio growth.

"We see our value proposition as identifying and managing properties with enduring demand and managing investment management products which deliver leading returns for our shareholders and investors," chief executive Philip Littlewood and chair Tim Storey said in their report.

"We look forward to the next six months of the financial year, during which we hope to progress towards satisfaction of the conditions to the establishment of Industre, as well as building portfolios of products that could be used as the base for future Stride products."

Since the Sept. 30 balance date, Stride sold its three remaining large-format retail stores to Investore Property, which it manages and holds a cornerstone stake in.

Provided that deal is approved, Stride's direct property ownership would be whittled down to seven office buildings valued at $197 million representing about 20 per cent of its portfolio. It would still manage another 60 properties valued at $1.76 billion on behalf of Investore, Industre and the Diversified trust.

Littlewood and Storey said Stride would use its balance sheet to keep building portfolios of assets to establish sector-specific products over the short-to-medium term.

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Stride reaffirmed annual distribution guidance of 9.91 cents per share.

The shares were unchanged at $2.20 and are up about 19 per cent the past year.

- BusinessDesk