Monday 30 May 2016 04:21 PM
UPDATE: Stride says 'stapled structure' protects PIE status while funds management grows
(Recasts to add comment from CEO, details of stapled structure)
By Paul McBeth
May 30 (BusinessDesk) - Stride Property has proposed splitting its property-owning unit from its real estate investment
management in a 'stapled structure' that would allow it to expand the management arm while preserving its favourable tax
status.
The Auckland-based company made the announcement while posting a 16 percent gain in full-year earnings driven by its
expanding property portfolio, which has portfolio investment entity (PIE) tax status.
It will call a special meeting to ask shareholders to approve a new structure, splitting property ownership and property
investment management into separate legal entities, but effectively operating in lock-step, in what's called a stapled
structure. The transaction would see shares in the investment manager distributed to Stride investors on a one-for-one
basis.
"Every listed property company at the moment is a PIE, so if we don't maintain that PIE status, our investors will be
disadvantaged to investors in other property companies," chief executive Peter Alexander told BusinessDesk. "This is all
about improving returns to our shareholders."
A PIE is a special tax investment entity 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. In March, listed property investor and fund manager Augusta Capital
said it would lose its PIE status from July because its increased focus on funds management meant the value of that unit
grew beyond the threshold of 10 percent of total assets, another restriction on the PIE status.
Stride's Alexander today said the company wants to expand its investment management business to continue growing
dividends, but because that income doesn't qualify for PIE status it's in shareholders' interest to change to a stapled
structure.
"It will be a material part of the overall return shareholders get - there is a lot of capital looking for investment in
real estate at the moment," he said. "We think there's going to be a lot of demand for experienced investment managers
in this sector with a track record, and we've got that and the set up to do it."
When announcing its annual result today, the company's board declared a fourth-quarter dividend of 2.75 cents per share
taking the annual payout to 10.75 cents and affirmed guidance that it plans to pay at least 11.25 cents in the 2017
financial year.
The shares rose 0.9 percent to $2.23, and have gained 1.6 percent so far this year. The company sold shares at 97 cents
in a $45 million capital raising when it listed in 2010, using the funds to internalise its management contract and
corporatise its structure.
(BusinessDesk)
ENDS