NZX-listed specialist Stride Property Group has added $650 million in extra real estate under management in the last year as it branches into new territory.
Stride is now forging ahead with its funds management entities including related party Industre which has 13 properties valued at $395m. That business is a joint venture with institutional investors via a special purpose vehicle.
Philip Littlewood, chief executive, said today after the company's annual result was released: "Our funds management business, which is our new direction, has grown from managing assets valued at $1.176b to $1.821b in the last year, so it's a growth of $650m which is the delivery of our strategy to grow our external investment management business.
"It's not a new direction. We have been doing this for the last three or four years. It's not directly comparable to Augusta Capital but we're setting up sector-specific investment management funds because we want to establish large, enduring funds. Some are listed now separately, for example, Investore Property. But others like Industre is a private fund," Littlewood said.
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Stride was aiming to set itself apart from the approximately 12 other listed real estate businesses on the NZX, he said.
"We have a different strategy to other property companies because we think this will deliver a higher return to our shareholders by both investing in and managing these businesses," Littlewood told the Herald.
Stride Property Group owns 19 per cent of Investore and the remaining shares will be widely held. Investore has $895m of property.
Stride will own 68 per cent of the non-listed privately owned Industre when it is officially established next week, Littlewood said. Industre will have $430m of property when it launches.
Stride also manages Diversified NZ Property Trust which owns real estate worth $414m but has a further $82m of new developments, taking it to $496m worth of property, Littlewood said.
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"This is a big transformation of the business which is really starting to take shape. We've said previously we intend to do an office fund, which would then give us four core vehicles, but we see opportunities beyond those four into other sectors but there are other markets," Littlewood said today.
The new vehicles could be listed on the NZX or unlisted "so long as they meet the investment criteria we're seeking: primarily around the right partner who wants to achieve the same outcome in terms of quality and growth," Littlewood said.
Valuation declines from Covid-19 pushed Stride Property Group's net profit after tax down 67 per cent from last year's $76.2m to $25.3m, yet net rental income rose $1.8m.
The group, which is Stride Investment Management and Stride Property, has properties valued at $996.1m. This morning, it released its result for the year to March 31, 2020.
The revaluation of the 26-property portfolio with 388 tenants has been hit by material valuation uncertainty due to Covid-19, it said. The pandemic has also created uncertainty for the 2021 outlook.
Yet revaluations only dropped $1.8m or 0.2 per cent from March 31, 2019.
Pre-tax profit fell by $52.7m to just $28.7m for the business which on April 30 sold three large-format retail properties to Investore Property for $140.7m. On April 1 last year it also sold an office building on Albany's Corinthian Drive for $50.5m.
Littlewood said: "Our year-end valuations were [done] mid-March and were up $65m. But into April, and due to the effects of coronavirus, valuations reduced back to zero so we lost all that gain. Had Covid-19 not hit, the valuations would have been up by $66.5m."
Stride's portfolio includes Westgate's NorthWest shopping centre, Wellington's Meridian building, the Silverdale retail centre which includes a Countdown and The Warehouse and Newmarket's Heartland House.
It bought a 4ha industrial Henderson property, The Concourse, in Auckland for $35m in the past year and developed the new Waste Management Headquarters on East Tamaki Rd in Auckland, a property valued at $98m.
The company's office block at 22 The Terrace, Wellington needs seismic strengthening.
The company gets 18 per cent of its income from offices, 20 per cent from industrial properties, 32 per cent from its shopping centres and large format retail and 16 per cent for managing four related-party entities.
The outlook is for falling profit: "Stride currently expects the financial impact from Covid-19 to result in a reduction in distributable profit for FY21 of between $2.9m and $5.1m. However, this is expected to be partially offset by one-off activity-based income in FY21 expected to increase distributable profit by between $2.2m and $3.6m."
Stride's total dividend remains the same as last year at 9.91cps. Littlewood said it had only borrowed $87m which gives a 17.8 per cent debt-to-asset ratio and he said that was the lowest it has ever been since the business listed in 2010.
Stride's shares are trading around $1.63.