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More complex property products for property investors are starting to hit the New Zealand market, as low interest rates stoke an appetite for commercial real estate.
Stride Property, formerly DNZ, announced plans this week to move to a ‘‘stapled structure,’’ which will require shareholder approval.
Chief executive Peter Alexander said ‘‘stapling’’ allowed Stride to split its funds management business from its property portfolio while remaining in the same group.
It basically meant that its property portfolio could continue to enjoy ‘‘PIE’’ tax status, while its management activities were taxed at a normal rate.
‘‘A PIE cannot receive certain types of income over a certain threshold, which our investment management business would be,’’ Alexander said.
‘‘About 17 of the 50 listed property entities in Australia are stapled structures. It’s the first time it’s been done in New Zealand but it’s a well-trodden path and it works incredibly efficiently and sustainably in Australia.’’
Stride already manages one diversified property fund which has $550m in assets under management, including the Queensgate and Chartwell shopping centres, conditionally purchased last year.
That fund is only for Australian ‘‘wholesale’’ or experienced investors, but Alexander said it could potentially be extended to New Zealand wholesale investors too, although it was not licensed for ‘‘Ma and Pa’’ retail investors.
Another potential new fund was based on the 19 supermarkets it bought last year, all leased to Progressive.
Stride’s move joins an emerging group of more flexible real estate vehicles including Oyster direct property fund and Vinta’s proposed $100m unlisted property fund for wholesale investors.
Alexander said that with interest rates so low and New Zealand’s economy relatively strong, it was not surprising other providers were coming into the market.
Meanwhile, Alexander would not say definitively whether Stride’s long-planned $300m redevelopment of Johnsonville Mall in Wellington would go ahead, despite falling foot traffic.
‘‘These projects are complex and they always take a lot of time . . . We’ve got a team working on it . . . but it’s really important for the local catchment and for our investors that we get it right.’’
He was also asked about the company’s new NorthWest mall which opened in Auckland last year.
‘‘It takes a little bit of time for the people who live in the catchment area to become aware of what’s on offer and to change their shopping habits. Westgate, the total area around NorthWest, is going through a major transformation at the moment.’’
However, Alexander did agree that commercial real estate was getting pricey. ‘‘The spread between the cost of interest and property yield is actually very, very high. I think we’re all quite cautious because we’re seeing prices paid on a yield basis that are the lowest we’ve seen.’’
During the year, Stride sold 51 Corinthian Dr in Auckland, for $15.2m and 170-180 Taradale Rd, Napier, for $4.3m. It had unconditional sales of 20-22 Pollen St in Auckland for $8m and Lot 83 Tauriko Industrial Estate in Tauranga for $500,000.