"It's not achieving a hell of a lot," said one real estate boss of Stride Property Group's plans to float its office assets into a new $931 million listed company next month.
He was referring to the fact that nothing new would be created in terms of additional properties: Fabric Property's creation is simply spun out of existing assets within Stride, moved into a new vehicle.
The initial public offering will contain 10 existing or under-construction properties moved from one business and put into another, including the $217m block being built by Mansons TCLM at 110 Carlton Gore Rd which Fabric plans to buy in two years' time.
So not everyone is excited about that seemingly golden shiny thing to add to the equities market: a new NZX listing.
A product disclosure statement said Fabric's indicative price range was $1.20 to $1.30, up to 241m shares would be issued and the first dividend paid next March.
Analysts delved into Monday's announcement of the planned listing on October 6.
Jarden Securities' Arie Dekker and Vishal Bhula said that 18 months ago, Stride had $186m of office assets with a weighted average lease term of 4.6 years, occupancy of 95.2 per cent and a cap rate of 6.65 per cent.
It had grown since then.
Stride was now set to spin out the new office company Fabric with initial assets of $714m, planning to increase that to $931m when it buys 110 Carlton Gore Rd from Mansons TCLM for $217m.
Stride's portfolio metrics had been transformed by a number of acquisitions, with weighted average lease term up to 7.2 years, occupancy at 98.5 per cent and a cap rate of 5 per cent, the analysts said.
Those Stride metrics were compared to office giant Precinct Properties with a weighted average lease term of 7.7 years, 98 per cent occupancy and 4.8 per cent cap rate, they said.
But they noted "considerable differences" between internally-managed Precinct with a portfolio at $3.3b, including $400m CBD retail, compared to Fabric, to be externally managed by Stride.
While Stride was a relative newcomer to the office sector, Precincts' considerable scale and long-standing presence there gave it very strong insight and credibility in the occupier market, with its Generator business adding flexibility too, Dekker and Bhula said.
In addition, Precinct had considerable development experience and a meaningful development pipeline, which had been derisked.
Fabric would have no meaningful development pipeline. Stride had been largely inactive in office until its recent run of acquisitions, they said.
But this was a further move by Stride into the funds management-focused business.
"We expect funds management income to settle above $30m, up from only $8.5m in FY17, with two-thirds of this in dependable base fees," the analysts said.
"We highlight the impact of the spin-out on Stride's gearing and balance sheet, noting that Stride shareholders are set to retain a 49.4 per cent to 58 per cent interest in Fabric through its retention of a 25 to 30 per cent cornerstone stake."
Stride is set to be left with $350m in direct property assets dominated by retail and one office asset being retained, pending as-yet to be quantified seismic works, and gearing of about 10 to 20 per cent, Dekker and Bhula said.
Forsyth Barr's Rohan Koreman-Smit and Scott Anderson headed their research "taking office for a spin".
Stride would move 10 office assets in Auckland and Wellington into Fabric and add Newmarket.
That would leave it with only one office property at 55 Elizabeth Lane, Wellington.
Stride would keep that to complete works on the building and may sell it to Fabric after completion, the ForBarr analysts said.
Stride expects the demerger to result in $5.2m of additional base management fees and lift total external assets under management to $3.2b.
The institutional offer and bookbuild for Fabric shares was planned to open next Tuesday.
The broker firm offer and Stride shareholder is planned for next Wednesday.
It would close at the end of September and Fabric was due to start trading on October 6.
The product disclosure statement said Stride would earn 6.4 per cent to 9.9 per cent of gross revenue from Fabric in the 2022 year.
"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," the PDS said.