New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<h2>Stride Property Group FY22 Result – Initial thoughts</h2>
Stride Property Group (SPG) delivered a solid FY22 result, with adjusted funds from operations (AFFO) +16% to NZ$50.1m boosted by acquisitions. The result was ahead of our expectations, driven by lower COVID abatements and stronger contributions from acquisitions. SPG recorded solid rent growth and stable portfolio metrics. Asset management income was flat with higher base fees being offset by a drop off in activity fees. External assets under management continue to grow with Industre being the key driver. The establishment of SPG’s office assets remains a key near-term strategic milestone but limited new information was provided and we look for more colour on the management call. Despite the solid lift in earnings SPG guided to flat FY23 dividends of 9.91cps.
Key takeaways
<ul>
<li>Office fund progressing – SPG provided some additional colour on the repositioning of its office portfolio towards modern, higher quality and greener assets. This has lowered the average building age by c.5 years and reduced maintenance capex. SPG believes the portfolio is now better positioned to benefit from a shift in occupier demand towards higher quality sustainable assets. There was no further updates on the progress of establishing the office assets as a standalone product.</li>
<li>Management business growing – Total management fees were broadly flat at NZ$25.3m but base management fees were NZ$17m +19% on the prior year. Activity fees were NZ$2.5m lower partly due to a the one off NZ$1.4m Industre establishment fee in FY21. FY21 Total AUM lifted to NZ$3.6bn (1H22 NZ$3.4b) driven by acquisitions and developments in Industre. Completion of the acquisition of 110 Carlton Gore Rd and divestment of lower quality office assets would see this lift this to c.NZ$3.8b. External assets under management was NZ$2.5b. SPG has NZ$130m of committed development projects across its funds with NZ$99m remaining to be spent and a future pipeline of NZ$375m+.</li>
<li>Portfolio performance remains solid – Rent reviews lifted net contract rent by NZ$1.5m with a +3.3% increase in the office portfolio and +4.8% at the NorthWest shopping centre and +3.9% at Silverdale On a look-though basis FY22 WALT and occupancy was 7.3 years (1H22 6.7) and 97.9% (1H22 97.7%).</li>
<li>Gearing up but manageable – SPG’s bank covenant gearing 28.7% as at 31 March 2022 and 36.8% on a committed basis. The bank debt covenant does not factor in SPG’s holdings in its projects; on a look through basis gearing is 31.5%. At balance date SPG had 110% of its drawn debt hedged – with the first payment of the Carlton Gore Rd acquisition this has now fallen to 82%.</li>
<li>NTA unchanged – broadly flat asset values resulted in a 1cps increase in adjusted NTA to NZ$2.25 per share 1H22.</li>
</ul>
Conference call:&nbsp;11am NZT, pre-registration required:&nbsp;<a href="http://apac.directeventreg.com/registration/event/5080659" target="_blank" data-saferedirecturl="https://www.google.com/url?q=http://apac.directeventreg.com/registration/event/5080659&amp;source=gmail&amp;ust=1653696975861000&amp;usg=AOvVaw1UP9kB0eOM3qfL7yDZ6p2s" rel="noopener">http://apac.directeventreg.com/registration/event/5080659</a>
Result summary
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/276/783/original/image_56433392751653611458149.png?1653611460" class="editor-image img-responsive" data-smartkarma-image-id="276783"></figure>
Source: Forsyth Barr analysis

Stride Property Group FY22 Result – Initial thoughts
Stride Property Group (SPG) delivered a solid FY22 result, with adjusted funds from operations (AFFO) +16% to NZ$50.1m boosted by acquisitions. The result was ahead of our expectations, driven by lower COVID abatements and stronger contributions from acquisitions. SPG recorded solid rent growth and stable portfolio metrics. Asset management income was flat with higher base fees being offset by a drop off in activity fees. External assets under management continue to grow with Industre being the key driver. The establishment of SPG’s office assets remains a key near-term strategic milestone but limited new information was provided and we look for more colour on the management call. Despite the solid lift in earnings SPG guided to flat FY23 dividends of 9.91cps.
Key takeaways

Office fund progressing – SPG provided some additional colour on the repositioning of its office portfolio towards modern, higher quality and greener assets. This has lowered the average building age by c.5 years and reduced maintenance capex. SPG believes the portfolio is now better positioned to benefit from a shift in occupier demand towards higher quality sustainable assets. There was no further updates on the progress of establishing the office assets as a standalone product.
Management business growing – Total management fees were broadly flat at NZ$25.3m but base management fees were NZ$17m +19% on the prior year. Activity fees were NZ$2.5m lower partly due to a the one off NZ$1.4m Industre establishment fee in FY21. FY21 Total AUM lifted to NZ$3.6bn (1H22 NZ$3.4b) driven by acquisitions and developments in Industre. Completion of the acquisition of 110 Carlton Gore Rd and divestment of lower quality office assets would see this lift this to c.NZ$3.8b. External assets under management was NZ$2.5b. SPG has NZ$130m of committed development projects across its funds with NZ$99m remaining to be spent and a future pipeline of NZ$375m+.
Portfolio performance remains solid – Rent reviews lifted net contract rent by NZ$1.5m with a +3.3% increase in the office portfolio and +4.8% at the NorthWest shopping centre and +3.9% at Silverdale On a look-though basis FY22 WALT and occupancy was 7.3 years (1H22 6.7) and 97.9% (1H22 97.7%).
Gearing up but manageable – SPG’s bank covenant gearing 28.7% as at 31 March 2022 and 36.8% on a committed basis. The bank debt covenant does not factor in SPG’s holdings in its projects; on a look through basis gearing is 31.5%. At balance date SPG had 110% of its drawn debt hedged – with the first payment of the Carlton Gore Rd acquisition this has now fallen to 82%.
NTA unchanged – broadly flat asset values resulted in a 1cps increase in adjusted NTA to NZ$2.25 per share 1H22.

Conference call:&nbsp;11am NZT, pre-registration required:&nbsp;http://apac.directeventreg.com/registration/event/5080659
Result summary

Source: Forsyth Barr analysis

Stride Property Group (SPG): FY22 Result – Initial Thoughts