Stride sells three Bunnings stores to Investore for $78.5 mln
By Paul McBeth
Nov. 13 (BusinessDesk) - Stride Property Group has sold three Bunnings stores to Investore Property, the unit it carved
out as a standalone property owner, for $78.5 million after renegotiating the terms of the leases.
Auckland-based Investore, which is still managed by Stride, will buy the three Bunnings stores in Rotorua, Hamilton and
Palmerston North at an initial annual yield of 6.13 percent, with a 2.5 percent annual uplift fixed into future rent.
That sale price is a premium to the $51.1 million value attached to the three properties in Stride's latest annual
report, however, Stride has agreed to pay $18 million to Bunnings to terminate the old leases which included the option
for Bunnings to buy the properties at the end of their term when they expired in June 2019. The new 12-year leases are
at a combined annual net rental of $4.81 million, compared to the $4.67 million Stride received in the March 2017 year.
Stride has been keen to exit large format retail properties since carving out Investore last year, but couldn't agree to
new lease terms with Bunnings in time for the initial public offering.
"These three leases were a legacy from prior to DNZ Property Fund Ltd listing on the NZX and this outcome is a
significant strategic step for Stride to manage a key lease expiry risk and to solidify its investment holdings in
standalone large format retail properties through Investore," Stride Investment Management chief executive Philip
Littlewood said. "The assets and new lease terms are consistent with Investore's investment mandate and provide
Investore with attractive portfolio diversification and earnings benefits."
Stride said the termination payment implies a net cost of $13 million after tax deductibility but isn't expected to
materially affect distributable earnings for the 2018 year. It still owns one Bunnings store in Auckland, which will
undergo work in the next 12 months, after which Stride expects to put the property up for sale. It valued the Auckland
site at $36.9 million as at March 31, with annual rent of $2.22 million.
Investore shareholders will have to approve the deal at a special meeting, and if that's achieved, anticipates the deal
will settle on Feb. 28. Independent directors Mike Allen and Kate Healy managed the sale and purchase agreement, and
received independent valuations from Jones Lang Lasalle which supported the acquisition price. CBRE valued the Hamilton
and Rotorua Bunnings stores for Stride's 2017 annual report, while Jones Lang Lasalle valued the Palmerston North and
Auckland sites.
The acquisitions will lift Investore's loan-to-value ratio to 46 percent from 39 percent, and while that's below a
maximum 48 percent LVR ratio, the property investor plans to sell up to three properties to give it headroom. The
company's also looking at a potential share buyback scheme and the board is also considering a bond issue, it said.
Investore affirmed annual distribute earnings guidance to be 7.46 cents per share.
Stride shares rose 0.6 percent to $1.64 while Investore shares slipped 0.7 percent to $1.35.
(BusinessDesk)