Stride Property Group – FY18 Annual Results
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tim.storey@strideproperty.co.nz
philip.littlewood@strideproperty.co.nz
jennifer.whooley@strideproperty.co.nz
louise.hill@strideproperty.co.nz
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Stride Property Group
Annual Report
2018
Highlights 02
Chairman’s Report 04
Board of Directors 06
Vision and Strategy 08
Performance 10
Chief Executive Officer’s Report 12
Executive Team 14
People 16
Places 20
Products 24
Portfolio Information 26
Stride Property Limited Portfolio 2018 28
Financial Statements 31
Corporate Governance 76
Remuneration Report 93
Statutory Disclosures 96
Corporate Directory 103
This document comprises the annual report for each of
Stride Investment Management Limited (SIML) and Stride
Property Limited (SPL), which are members of Stride Property
Group (Stride).
Each of SPL, SIML and Stride has been designated as
“Non-Standard” (NS) by NZX. The implications of investing in
stapled securities of SPG are set out at page 102 of this report.
CONTENTS
Growth in real estate investment management
business – income increased to:
Total portfolio value
2
at 31 March 2018
1. Distributable profit is a non-GAAP financial measure adopted by Stride Property Group (Stride) to assist Stride and investors in assessing Stride’s profit available for distribution. It is defined
as net profit/(loss) before income tax, adjusted for non-recurring and/or non-cash items, share of profits in associates, dividends received from associates and current tax. Further information,
including the calculation of distributable profit and the adjustments to net profit before income tax, is set out in note 8 to the consolidated financial statements on page 43.
2. Includes Northwest Two, Auckland, which is classified as inventory in the consolidated financial statements. Refer note 13 to the consolidated financial statements on page 53.
3. Includes $9.5 million gain from the restructure of the Bunnings leases prior to disposal of these properties to Investore Property Limited on 28 February 2018.
4. The development cost of $13.1 million includes costs related to tenancies agreed post balance date.
5. As contained in the Stride Property Limited Notice of Special Meeting of Shareholders and Explanatory Memorandum dated 10 June 2016.
FY18 growth in value of managed properties of:
Bond offer for Investore Property Limited
completed post balance date, managed by SIML
Representing a net valuation gain
3
of:
redevelopment of SPRINGS ROAD property agreed
with Waste Management with up to $23m possible
expansion of scope of works for increased rental.
25 YEAR LEASE to commence on completion
15 ROCKRIDGE AVENUE development
4
delivered for a yield on cost (including land)
of 7.1% and development profit of $3m
Investment in Investore and Diversified overall
OUTPERFORMED FY18 FORECASTS
5
(including SPL fees)
$
13 .1m
$
43m
+
$
41. 9m
$
48.3m 5.6
%
+
$
1.1m
Profit after
income tax
Distributable
profit
1
after current
income tax
Tot al c a sh
dividend for FY18
Up on
F Y17
or
Up on
F Y17
PHILIP LITTLEWOOD
appointed as CEO
TWO NEW
EXECUTIVES
appointed
New director
PHILIP LING
appointed
DEVELOPMENT TEAM established
2
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
HighlightsHighlights
DEAR SHAREHOLDERS
I am pleased to report our results
for the year ended 31 March 2018. This marks the second year
since the new structure was put in place and Stride Property
Group (Stride) was listed in July 2016. The rationale for the
restructuring and realignment of Stride has been borne out by
the results we have achieved in the past year.
Profit attributable to shareholders for the year was $95.3 million,
which was up considerably on the $53.3 million recorded in the
prior financial year. This increase in profitability was driven by a
number of factors:
• growth in real estate investment management fee income
of $2.2 million including SPL fees (12% increase on forecast);
• increased contributions from our investments in
Investore Property Limited (Investore), an NZX-listed
entity, and Diversified NZ Property Trust (Diversified); and
• most significantly, by a strong uplift in the value of the
investment property portfolio owned by Stride Property
Limited (SPL) of $48.3 million, which includes a $9.5 million
gain from the restructure of the Bunnings leases.
The increased contributions from our investments in Investore
and Diversified, and the growth in the value of SPL’s own
investment property portfolio, are testament to the execution
of our strategy to build returns to shareholders through high
quality direct investments together with a high performing real
estate investment management services business. Both parts
of Stride’s business are driven by the quality management team
at Stride Investment Management Limited (SIML).
The decision to focus on real estate investment management
has resulted in significant growth in this part of Stride’s activities
and confirms Stride as a leader in the New Zealand property
sector. Revenue from the real estate investment management
business
2
accounted for 15%
of total revenue for Stride versus
11% in the prior year. Revenue from the SPL investment property
portfolio accounted for 74% of total Stride revenue, while our
investments in Investore and Diversified contributed 11% of
total revenue.
Overall, our results were in line with or higher than the
prospective financial information provided at the time of
Stride’s formation in 2016.
Profit after income tax of $95.3 million is significantly higher
than the prospective financial information, reflecting the higher
share of profits in Investore of $5.4 million and higher fair value
gain of $47.2 million in SPL’s property portfolio, compared to
the prospective financial information.
The net valuation movement
3
of $48.3 million or 5.6%
for the
SPL property portfolio was driven by both strong market rental
growth and capitalisation rate compression, with the weighted
average capitalisation rate for the SPL investment portfolio
firming to 6.57%.
Transactional activity completed during the year has assisted
with this value growth, including the completion of the industrial
development at 15 Rockridge Avenue, Auckland.
DIVIDEND
We seek to deliver consistent dividends and
long-term growth for our shareholders. The Boards of SPL and
SIML have approved a combined cash dividend of 2.47 cents
per share for the fourth quarter to 31 March 2018, bringing
the full FY18 cash dividend to 9.91 cents per share, in line
with the guidance. This represents a payout of 93.2% of
distributable profit. The Boards note this year’s distribution
is slightly below Stride’s payout policy of 95% to 100% of
distributable profit, which reflects some short term benefits
from lower corporate costs for the FY18 financial year that
are expected to stabilise in FY19.
The Boards confirm guidance for a combined annual cash
dividend of 9.91 cps for the 2019 financial year.
CAPITAL MANAGEMENT
We continue to maintain a
strong and conservative capital structure. As at 31 March 2018
Stride had drawn bank facilities of $307.7 million, and interest
rate hedging in place to cover 83% of drawn bank borrowings.
The loan to value ratio was 34.1% as at 31 March 2018 which
sits below Stride’s target range of 38% to 42% and well below
Stride’s banking covenant of 50%.
SENIOR MANAGEMENT & BOARD APPOINTMENTS
During the year, we announced the appointment of Philip
Littlewood as Chief Executive Officer of SIML, following a
comprehensive search. Philip’s appointment recognised his
contribution to setting Stride’s strategic direction in his previous
role as General Manager Investment Management. Philip was
instrumental in devising our strategy to separate our real estate
investment management business from our property investment
activity and creating the stapled structure.
The SIML team was further strengthened during the year
with the establishment of two new teams — the Development
team led by Mark Luker, and the Corporate Services team led
by Louise Hill.
At the Board level, Philip Ling was appointed to the Boards
of SPL and SIML in June 2017. Philip is an experienced
former CEO, business leader and executive board member in
New Zealand, Australia and Asia. With over 30 years’ experience
in funds and property management in both listed and unlisted
entities, his appointment has complemented and further
strengthened the Boards’ capabilities.
STRATEGY
When we established the new structure for
Stride, our objectives were very clear. They were to allow our
shareholders to benefit from holding interests in both the
property investment business and the real estate investment
management business. These benefits are derived from the
additional earnings we are able to generate from the real
estate investment management business without intensive
capital commitment, and also from operating an integrated
property development and investment model. The latter allows
us to develop new opportunities for potential property sector
investments utilising the specialist expertise that has been
built within SIML.
The Boards are confident that Stride is well positioned for
further growth. We believe there is strong potential in the
market to further enhance the portfolios of SPL, Investore
and Diversified, and to establish new investment products.
We seek to invest in and manage property portfolios that deliver
market leading returns for our shareholders. As a shareholder
you can expect to see an ongoing programme of growth in our
real estate investment management business, in keeping with
our stated ambition of building New Zealand’s best performing
listed property investment and management company, one that
invests in the best places and is managed by the best team.
Chairman’s Report. Stride has had a very
successful year, outperforming the prospective
financial information
1
, and undertaking a
number of transformative transactions, including
agreeing with Waste Management to develop a
new head office in return for a 25-year lease.
Stride’s
in FY18 is
a testament to our strategy of investing in our
people
, and the strength of Stride management.
1. As contained in the Stride Property Limited Notice of Special Meeting of Shareholders and Explanatory Memorandum dated 10 June 2016.
2. Excluding eliminated SPL management fees which were $7.7 million in FY18, up $3.0 million from FY17.
3. Includes $9.5 million gain from the restructure of the Bunnings leases prior to disposal of these properties to Investore Property Limited on 28 February 2018.
TI M
STOREY
Chairman of SPL & SIML
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Stride Property Group | Annual Report 2018
Chairman’s ReportChairman’s Report
Board of Directors
MICHAEL STIASSNY — BCom, LLB, FCA, CFInstD
Independent and Non-Executive Director
SPL Appointment — 9 April 2010
SIML Appointment — 16 February 2016
Michael has widespread experience in all matters financial. He has a
40 year strong background in financial consultancy and now specialises
in strategic advisory and issues resolution. He is currently Chairman of
Vector Limited, Tower Limited, Ngāti Whātua Ōrākei Whai Rawa Limited
and the NZ Transport Agency, as well as a director of a number of public
and private companies. Michael is a Chartered Fellow and past president
of the Institute of Directors in New Zealand (Inc.) and a Fellow of Chartered
Accountants Australia and New Zealand.
JOHN HARVEY — BCom, CA, CFInstD
Chair of the Audit and Risk Committee
Independent and Non-Executive Director
SPL Appointment — 15 September 2009
SIML Appointment — 16 February 2016
John has over 35 years’ professional experience as a chartered accountant.
He was a partner in PricewaterhouseCoopers for 23 years where he held
a number of management and governance responsibilities. John retired from
PwC in June 2009 to pursue a career as a professional independent director.
He is a Chartered Fellow of the Institute of Directors in New Zealand (Inc.)
and is currently a director of Investore Property Limited, Kathmandu Holdings
Limited, Heartland Bank Limited and is Chairman of New Zealand Opera Limited.
DAVID VAN SCHAARDENBURG — BCom, CA, CMInstD
Independent and Non-Executive Director
SPL Appointment — 12 May 2010
SIML Appointment — 16 February 2016
David is a principal of the investment firm, New Zealand Funds Management.
He has worked in financial analysis and portfolio management roles for over
30 years, including three years in London. From 1994, he directed Fundsource
Limited, New Zealand’s leading investment research group, and from 1997 was
Chief Investment Officer at NZ Funds, overseeing the management of $1 billion
across a variety of asset classes. He is a Chartered Member of the Institute of
Directors in New Zealand (Inc.).
MICHELLE TIERNEY — BA, MBA
Independent and Non-Executive Director
SPL Appointment — 17 July 2014
SIML Appointment — 16 February 2016
Michelle has more than 20 years’ experience in the property industry, and was
most recently the General Manager of Business Development and Strategy for
the National Australia Bank Global Institutional Bank. Prior to this, Michelle was
Fund Manager of the $3.8 billion GPT Wholesale Shopping Centre Fund for
ASX50 company The GPT Group. Michelle is a member of the Australian Institute
of Company Directors, Women on Boards Australia and the Women’s Leadership
Institute Australia and is an Associate of the Australian Property Institute.
PHILIP LING — MSc, MRICS, CMInstD
Independent and Non-Executive Director
SPL Appointment — 26 June 2017
SIML Appointment — 26 June 2017
Philip brings more than 30 years of extensive experience gained within funds
and property management entities, in senior management and CEO roles and
directorships, throughout New Zealand, Australia, the United Kingdom and
Asia Pacific. Most recently, Philip was CEO, Asia Pacific, of LaSalle Investment
Management, a Chicago-based global real estate funds manager with assets
under management of $USD58 billion, Chairman of the Asia Pacific Investment
Committee and a member of LaSalle’s Global Management Committee. Philip is
a Chartered Surveyor, a Professional Member of the Royal Institution of Chartered
Surveyors, a Chartered Member of the Institute of Directors in New Zealand (Inc.)
and a former Fellow and President of the New Zealand Institute of Quantity Surveyors.
TIM STOREY — LLB, BA
Chairman
Independent and Non-Executive Director
SPL Appointment — 1 April 2009
SIML Appointment — 16 February 2016
Tim was appointed Chairman of SPL in 2009. He has more than 30 years’
business experience across a range of sectors and has practised as a lawyer in
Australia and New Zealand, retiring from the Bell Gully partnership in 2006. Tim
is a member of the Institute of Directors in New Zealand (Inc.) and is Chairman
of JustKapital Limited (an ASX listed entity), director of Investore Property
Limited and director of a number of private companies.
6
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Board of DirectorsBoard of Directors
ABOUT THE STAPLED SHARE STRUCTURE
Stride Property Limited (SPL) and Stride Investment
Management Limited (SIML) are ‘Stapled Entities’ with
the ordinary shares of SPL and SIML quoted on the NZX
under a single ticker code ‘SPG’ (Stride), with Stride
listed with a ‘non-standard’ designation. The practical
implications for a shareholder that holds a stapled
security in Stride include:
• you are a shareholder of both SPL and SIML
• the price quoted on the NZX is for the stapled
security in Stride — there is no separate price for
an SPL share or a SIML share
• to sell a SPL share or a SIML share, you must also
sell the corresponding SIML share or SPL share, as
applicable, to the same purchaser
• market disclosures are made in respect of the
Stride companies as a whole, except for matters
such as declarations of dividends or passing of
resolutions at annual meetings
• distributions are paid by each of SPL and
SIML separately
• if new securities are issued, this will mean equal
numbers of SPL shares and SIML shares will
be issued
• shareholders are entitled to attend, or vote by proxy,
at separate meetings of shareholders of each of
SPL and SIML.
Creating shareholder value
across two business models.
Stride Property Group (Stride)
i
s comprised of Stride Property
Limited and Stride Investment
Management Limited.
Stride is unique in New Zealand,
in combining both property
investment and real estate
investment management
expertise in one integrated
business model.
This integrated structure allows
Stride to develop both the
property investment business
and real estate investment
management business. Stride’s
stapled share structure means
shareholders can hold interests
in both types of businesses, while
allowing each entity to focus on
its specialist core activity.
Stride’s vision is to be
New Zealand’s best performing
listed real estate investment and
management company.
We will deliver on this vision
by continuing to invest in and
manage property portfolios that
deliver market leading returns to
our investors. We will continue
to oversee the business in a way
that fosters and values innovation
and protects and grows your
investment.
VisionStride Property Group
1. Includes NorthWest Two, Auckland which is classified as inventory in the consolidated
financial statements. Refer note 13 to the consolidated financial statements on page 53.
STRIDE INVESTMENT MANAGEMENT
LIMITED
(SIML) is a specialist real estate
investment manager. It manages $2.2 billion of
investment property across the property portfolios
of SPL, Investore Property Limited, and Diversified
NZ Property Trust.
STRATEGIC PILLARS
PEOPLE
PRODUCTS
STRIDE PROPERTY LIMITED
(SPL)
invests
in quality New Zealand property investments, has
a cornerstone 19.9% shareholding in Investore
Property Limited and owns approximately 2%
of the units in the Diversified NZ Property Trust.
SPL owns $902 million
1
of commercial property
as at 31 March 2018, comprising 46% retail
shopping centres, 25% commercial offices,
5% large format retail and 24% industrial.
Retail Shopping
Centres 46%
Commercial
Office 25%
Large Format
Retail 5%
Industrial 24%
$902m
1
$738m
$538m
PLACES
PERFORMANCE
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Stride Property Group | Annual Report 2018
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Stride Property Group | Annual Report 2018
9
Vision and StrategyVision and Strategy
Financial Performance
2018
Actual
($m)
2018
Forecast
($m)
Change
($m)
Change
%
Net rental income57.658.2(0.6)(0.9)
Profit before net finance expenses, other expenses and income tax57.157.9(0.9)(1.5)
Net finance expenses(16.3)(16.6)0.31.8
Profit before other expenses and income tax40.741.3(0.6)(1.4)
Other income60.15.055.11,110.7
Profit before income tax100.846.354.5117.9
Income tax expense(5.5)(10.6)5.047.7
Profit after income tax attributable to shareholders95.335.759.6167.0
Basic earnings per share – weighted26.10 cents9.78 cents
Distributable profit before current income tax48.447.41.02.1
Distributable profit after current income tax38.838.10.71.9
Property values902.2883.318.92.1
Bank debt drawn307.7359.6(51.9)(14.4)
Bank loan to value ratio34.1%40.7%
Net Tangible Asset (NTA) per share$1.82$1.60
Five Year Financial Summary
2018
($m)
2017
($m)
2016
($m)
2015
($m)
2014
($m)
Net rental income57.657.961.857.257.4
Profit before net finance expenses, other income and
income tax from continuing operations
57.151.055.452.649.9
Net finance expenses(16.3)(16.8)(15.2)(13.0)(14.9)
Profit before other income and income tax from
continuing operations
40.734.140.239.635.0
Other income60.127.958.337.714.0
Profit before income tax from continuing operations100.862.198.577.349.0
Income tax expense(5.5)(7.9)(9.1)(8.5)(7.4)
Profit after income tax from continuing operations95.354.289.468.841.6
(Loss)/profit from discontinued operations
1
0.0(0.9)3.00.00.0
Profit attributable to shareholders95.353.392.468.841.6
Basic earnings per share — weighted26.10 cents14.63 cents27.93 cents23.16 cents14.50 cents
Distributable profit before current income tax48.445.546.340.335.0
Distributable profit after current income tax38.837.737.132.127.7
Basic distributable profit after current income
tax per share - weighted
10.63 cents10.33 cents11.22 cents10.80 cents9.67 cents
Property values
2
902.2895.31,274.8872.4780.2
Bank debt drawn 307.7347.5532.2305.9268.2
Bank loan to value ratio34.1%
2
38.8%
2
41.7%35.1%34.4%
NTA per share
3
$1.82$1.67$1.97$1.81$1.69
Adjusted NTA per share
4
$1.84$1.68$2.00$1.82$1.69
1. Includes the reclassification of cash flow hedge reserve to the consolidated statement of comprehensive income for discontinued operations.
2. Includes NorthWest Two, Auckland, which is classified as inventory in the consolidated financial statements. Refer note 13 to the consolidated financial statements on page 53.
3. Excludes intangibles.
4. Excludes intangibles and after tax fair value of interest rate derivatives.
Note: Values in the table above are calculated based on the numbers in the consolidated financial statements for each respective financial year and may not sum due to rounding.
On 10 June 2016, Stride Property Limited (SPL) issued an Explanatory Memorandum for the purposes of a special meeting
of shareholders. The Financial Performance table is a comparison of the prospective financial information in the Explanatory
Memorandum to Stride Property Group’s actual results for the year ended 31 March 2018.
Note: Values in the table above are calculated based on the underlying numbers in the respective financial information and may not sum due to rounding.
The Five Year Financial Summary table reflects the numbers in the consolidated financial statements for each respective year. On 11 July 2016, SPL distributed shares in its
subsidiary Investore to SPL shareholders and Investore issued shares to investors in connection with its initial public offer (IPO). Investore entered into a listing agreement with
NZX Limited (NZX) and its ordinary shares were quoted, and commenced trading on the main board equity security market of NZX, on 12 July 2016. The financial performance
for Investore for the period ended 11 July 2016 (2017 column) and the year ended 31 March 2016 (2016 column) has been presented as “Profit from discontinued operations”.
Performance
11
Stride Property Group | Annual Report 2018
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Stride Property Group | Annual Report 2018
PerformancePerformance
Chief Executive Officer’s Report. Stride has
made a strong start in its first two years as a
stapled entity, but we have ambitions to grow
further. Over time, we will seek to establish a
group of commercial property funds to provide
the opportunity for further growth in our real
estate investment management business.
It gives me great pleasure to present the results for Stride for
the financial year ended 31 March 2018. This has been a year
of strong performance with growth in the real estate investment
management business of Stride Investment Management
Limited (SIML), coupled with an increase in the total value of
the investment property portfolio of Stride Property Limited
(SPL). The latter has been achieved in part by the efforts of the
management team to lift the quality of the portfolio through the
leasing and development activities undertaken during the year.
SIML’S PERFORMANCE
SIML manages $2.2 billion
of property assets, including SPL’s own investment property
portfolio, together with those of Investore and Diversified.
The year was another active one, with SIML managing the
divestment of two properties and the acquisition of two new
properties by Investore, the sale of three properties from SPL
to Investore, a number of significant developments, including
SPL’s 15 Rockridge Avenue, Auckland, development being
completed, and a range of significant new transactions providing
future growth opportunities. SIML completed a total of 616 lease
transactions across all managed portfolios for the year ended
31 March 2018, and management fee income of $21.0 million
was 12% higher than the forecast income of $18.8 million.
SPL’S PERFORMANCE
SPL’s investment property
portfolio is diversified across the four key commercial
market segments: commercial offices, industrial, and retail,
encompassing both standalone large format retail properties
and retail shopping centres.
The SIML team had a very active year of leasing, and while
occupancy as at 31 March 2018 was stable — 96.7% compared
to 96.8% as at 31 March 2017 — in the month following year
end the new development at Rockridge Avenue was fully let,
which, if these leases had been entered into prior to financial
year end, would have resulted in occupancy of the SPL property
portfolio of 98.8% as at 31 March 2018. Forecast lease expiries
over the next two years have reduced by 7.4%, from 26.2% as at
31 March 2017 to 18.7% as at 31 March 2018.
Within the industrial portfolio, the major transactions during the
year included the completion of the development at 15 Rockridge
Avenue in Auckland, which was the final building in an industrial
estate owned and developed by SPL, and the announcement of
a new redevelopment project for Waste Management NZ Limited
(Waste Management) at 11 Springs Road in Auckland. Waste
Management has committed to the facility for a significant term,
with an initial 25 year lease, which will commence when the
facility is completed in 2019. The industrial portfolio occupancy
rate was 94.6% and the weighted average lease term (WALT)
was 4.3 years as at 31 March 2018, up from 3.5 years at the
end of the prior year. Following the completion of leasing at
15 Rockridge Avenue post balance date, the occupancy of the
industrial portfolio is 100% and the WALT has increased to
4.4 years. When the Waste Management facility is completed,
and the 25 year lease commences, this will add approximately
5 years to the WALT for the industrial portfolio.
SPL’s office portfolio represents a quarter of SPL’s total property
portfolio. During the year Meridian Energy agreed to a new 12 year
lease of their head office building at 33 Customhouse Quay in
Wellington. Meridian relinquished Level 1 as part of the new lease,
however the Level 1 space has been successfully leased to
AMP Capital Investors, Wellington Regional Council and Davanti
Consulting. This is a testament to the quality of that building, New
Zealand’s first purpose-built 5 Green Star rated office, which was
also awarded the first 6 star NABERS rating in New Zealand during
the financial year. The office portfolio had an overall occupancy
rate of 99.8%, and the weighted average lease term was 5.1 years
as at 31 March 2018, up from 4.3 years as at 31 March 2017.
SPL’s retail portfolio (comprising both shopping centres and
standalone large format retail properties) represents just over half
of the total portfolio, and 93% of properties are located in the
high growth Auckland and Tauranga markets. During the year, we
restructured the leases on three properties occupied by Bunnings
and sold the properties to Investore. The lease restructure resulted
in a $9.5 million gain on the 31 March 2017 valuations, after
allowing for all costs and incentives. These Bunnings properties fit
well with Investore’s investment strategy that is focused on large
format retail properties. As at 31 March 2018, the occupancy rate
of SPL’s retail portfolio was 97.2% and the weighted average lease
term was 5.4 years.
We are very pleased to report a significant increase in retail sales
at NorthWest Shopping Centre and Silverdale Centre for the year
to 31 March 2018. Total retail sales
1
for NorthWest Shopping
Centre and NorthWest Two increased by 14.4%, with like-for-like
specialty sales
2
alone increasing by 13.5% to $8,075 per square
metre. Total sales
3
at Silverdale Centre also had a positive year,
increasing by 4.4%. These centres are located in two of the fastest
growing catchments in New Zealand and we are confident of
continued sales growth over the coming years.
STRATEGY
Stride is developing a real estate investment
management business for the long term, with each step towards
growth deliberate and carefully considered. We use our expertise
to invest in and manage quality real estate portfolios that attract the
highest demand and deliver market-leading returns to our investors.
We believe that by creating value for our investors we will continue
to create sustainable growth opportunities for Stride’s shareholders.
We are implementing our strategy through the pursuit of four key
strategic pillars, which are outlined below but are discussed in
greater detail elsewhere in this report:
PEOPLE
As we continue to increase our focus on investment
management, we have committed to build our capability to deliver a
full range of services to our customers, from asset management to
property development, from financial and corporate services to
investment management. In the past year we established two
new teams at SIML, including a Development team with overall
responsibility for property development across all property sectors,
and a Corporate Services team with responsibility for governance,
compliance, risk, health and safety and in-house legal. These new
teams complement and add to Stride’s expertise and experience,
and help position us as New Zealand’s best, full service property
investor and manager. At Stride, we focus on building strong
teams and create work environments that our people enjoy and
will prosper in; people who exhibit our four core behaviours of
being discipline driven, fresh thinkers, people-centred and nimble
performers. In early 2018, we launched a series of initiatives as
part of Stride’s people strategy that are designed to further
support these aims.
PLACES
We believe that our ability to carefully select, astutely
invest in and manage outstanding places provides Stride’s
shareholders and investors with the opportunity to realise strong
investment performance over the long term. We are able to
leverage our investment management, development and leasing
expertise and experience to select property investments that
deliver market leading returns.
PRODUCTS
Stride focuses on the creation and management
of sustainable, single sector focused investment products for
our investors. These investments are structured with the right
properties and capital structures to meet the objectives and needs
of investors, and we are dynamic in taking advantage of changing
market conditions. We also believe in co-investing in our products
to ensure we have a long-term alignment with our investors.
PERFORMANCE
Our performance will be delivered through
targeting investments that exhibit high long-term demand with
consistently strong returns through varying market conditions,
and growing our high performing and sustainable investment
management business.
LOOKING AHEAD
Stride has made a strong start in its
first two years, but we have ambitions to grow further. Over time,
we will seek to establish a group of commercial property funds
to provide the opportunity for further growth in our real estate
investment management business. SIML will actively search for
new investment opportunities that meet the requirements for
existing funds and also seek to create additional sector-specific
focused property investment funds. Over the short to medium
term, SPL will look to use its balance sheet to acquire properties
that may ultimately be used to establish these new focused funds.
SPL will also leverage the in-house development capability of SIML
to identify and undertake new developments which will deliver the
strong investment returns we require.
PHILIP
LITTLEWOOD
Chief Executive Officer
SIML
1. Total retail sales is the annual sales on a rolling 12-month basis (excluding GST).
2. Like-for-like specialty sales only includes sales from those tenancies who have traded for the past 24 months and includes commercial services categories.
3. Sales data is not collected for all tenants at Silverdale Centre. Some tenants are not
obliged to provide sales data under the terms of their lease.
Chief Executive Officer’s Report.
12
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
13
Chief Executive Officer’s Report.
ROY
is responsible for Stride’s retail portfolio. His role covers all
aspects of retail asset management, including retail planning and
leasing. A qualified accountant with more than 25 years’ experience
in the retail shopping centre industry, Roy is a recognised authority
on property accountancy, centre management and retail leasing.
Prior to joining Stride, he was employed by Challenge Properties,
St Lukes Group and Kiwi Income Property Trust.
ANDREW
joined Stride in 2004 and has more than 20 years’
property industry experience. Prior to joining Stride, Andrew
worked in property development roles and with large retail
occupiers, including two years in Dublin, where he managed a
property portfolio for Ireland’s leading betting agency. Andrew
is responsible for the asset management of the commercial,
industrial and large format retail portfolios, and is currently
Auckland Branch Vice President of the Property Council.
MARK
is responsible for Stride’s development activities.
He has over 25 years of experience in the property development
and investment industry, and has been involved in complex large-
scale retail and commercial development projects in both New
Zealand and Australia. Mark joined Stride from Kiwi Property Group
Limited, where he held the roles of General Manager Development
and Project Director, Sylvia Park. Mark is a senior member of the
Property Institute of NZ and a registered property consultant.
JENNIFER
has more than 25 years’ experience in the property
industry and is responsible for Stride’s overall financial plans and
policies, ensuring compliance of its accounting practices. Jennifer
is also responsible for the HR function within Stride. Jennifer was
Chief Accountant for Fletcher Property before joining Stride in 2002.
She holds a Chartered Accountant (CA) designation from Chartered
Accountants Australia and New Zealand. Jennifer has been named
the EY CFO of the Year for 2018.
LOUISE
joined Stride in November 2017, and has more than
20 years’ legal experience. Louise’s previous roles include Head
of Legal (NZ) for Fletcher Building and Senior Associate in the
corporate/commercial team at Bell Gully. Louise is responsible
for a range of corporate functions within Stride, including legal,
governance, compliance, health and safety and risk.
PHILIP
joined Stride in 2014 and has over 18 years’ experience
in property investment management in New Zealand and overseas.
Highlights of his work history include six years in the UK with Morgan
Stanley’s real estate merchant banking division, and a partnership in
a large private-equity real estate firm. Prior to this, Philip held the
position of Investment Manager at AMP Capital Investors. Philip holds a
Bachelor of Property and a Bachelor of Commerce (Finance) from the
University of Auckland and a Master of Business Administration from
Imperial College London.
ANDREW HAY — BProp, MBA
GENERAL MANAGER COMMERCIAL & INDUSTRIAL
ROY STANSFIELD — ACA
GENERAL MANAGER SHOPPING CENTRES
MARK LUKER — Dip.Val.Prop
GENERAL MANAGER DEVELOPMENT
JENNIFER WHOOLEY — CA
CHIEF FINANCIAL OFFICER
PHILIP LITTLEWOOD — BProp, BCom, MBA
CHIEF EXECUTIVE OFFICER
LOUISE HILL — BCom (Hons), LLB (Hons)
GENERAL MANAGER CORPORATE SERVICES
& COMPANY SECRETARY
E xecu tive Team
14
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Executive TeamExecutive Team
Stride’s total employee numbers have more than doubled
over the past two years. This has been driven by the growth
we have seen in the property assets we have under
management and the development of the real estate
investment management business.
We have added market leading talent to the Stride team
as we have built our overall capability. Our particular focus
has been on adding people (from within the industry) who
are highly experienced and who are engaged by our strategy.
This new team provides the balance of entrepreneurship and
excellence required to take our business to the next level.
To support this expanded team of people, a new people
strategy has been developed to ensure we continue to employ
the best people and are also able to grow our credibility and
reputation in the market as an employer of choice. This strategy
is based around four clear goals, which will support the delivery
of our other strategic priorities. In addition, our people strategy
plays a critical role in safeguarding our distinctive culture
and ensuring a progressive, sustainable and healthy working
environment for our employees.
The first of these goals is around attracting and retaining talent.
In order to attract and retain the best people, we are committed
to creating an inclusive environment where people are proud
to work. Among the initiatives launched this year, we have
introduced flexible working practices, and we have sponsored
local charity involvement by our people. These initiatives are
designed to help our people feel proud by being empowered
to do their jobs well; through contributing to the success of the
wider business; and being able to add value to the communities
we are a part of.
The second goal is centred on providing the opportunities for
the growth and development of our people. We know that deep
industry knowledge empowers us to make informed decisions,
deliver great results and grow as individuals. Knowledge is built
through training and experiences, by having opportunities to
work on challenging projects, sharing knowledge with other
passionate people, and by having a continued path to develop
as experts and leaders in our industry.
Third is our goal of building great teams that make things
happen. It’s important to us that our people have the tools and
an environment that cultivates entrepreneurship, proficiency and
performance. It means that our people can work and collaborate
effectively, leverage expertise and focus on adding value for
our customers and consequently our shareholders. Despite
the growth in total employee numbers we have endeavoured
to maintain a flat management structure that enables people
to work in close-knit teams. We are well advanced in our digital
transformation which will better equip our people to manage
the business.
Finally, we want our people to share in our success. For Stride
to succeed it’s important that everyone knows what to do,
what we are trying to achieve and whether we are on track.
Communication is key: through listening, sharing, acknowledging,
and rewarding we can drive success and celebrate individual
and team achievement. Current initiatives underway include
our monthly and annual ‘InStride’ Awards (recognising people
who demonstrate Stride’s behaviours), company-wide events,
the introduction of long service leave entitlements, regular
Town Hall-style company-wide meetings, and the rollout of
a new Intranet for employees.
PEOPLE CENTRED
The success of every
place we are involved with ultimately depends on
satisfying the wants and needs of people. At Stride we
imagine ourselves in our tenants’ shoes and create the
environment they will enjoy and prosper in.
FRESH THINKERS
Stride people are
at the forefront of new thinking on capturing
the optimum value for people from properties.
Our feet are firmly on the ground while our
heads continuously scan new horizons for
better ways of doing things.
DISCIPLINE DRIVEN
Stride people go to
great lengths to do the basics of our business
incredibly well. That means getting all the details
right and having a rigorous process to evaluate
every opportunity. We astutely navigate risk,
managing downside and seizing opportunities.
NIMBLE PERFORMERS
Our flat, tight
structure and our size allow Stride and our
people to be highly responsive to changing
conditions and make fast decisions.
Stride is a behaviours-based organisation
with four key behaviours that underpin
business operations and differentiate
Stride from other organisations
At Stride, we attract and retain people with
deep industry knowledge who are discipline
driven,
centred, fresh thinkers
and nimble performers. We build great teams
to create the environments our people will
enjoy and prosper in.
16
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
PeoplePeople
The year in review has been a significant
year for SIML’s people — two new teams were
established, headed by two new executives,
and people from across SIML’s business were
engaged to work as a team in implementing a
new financial management software system.
These initiatives will strengthen our real estate
investment management services capability.
DEVELOPMENT TEAM
SIML manages a number
of developments across all of its managed portfolios.
For example, SIML is currently managing the rebuild of part
of Diversified’s Queensgate Shopping Centre following the
Kaikoura earthquake in November 2016; the development of
SPL’s Springs Road, Auckland, property as a new head office
for Waste Management; the extension of Investore’s Mitre 10
Mega at Botany, Auckland; and is also exploring the
redevelopment of Johnsonville Shopping Centre, which is
owned 50:50 by SPL and Diversified. In addition, Investore
has further development opportunities with its Timaru site.
SIML recognises the need to ensure it has specialist skills in
the area of development in order to provide the best service
to its managed funds. During FY18 SIML recruited a new
General Manager Development, Mark Luker, who has created
a strong, full-service Development team. Mark has brought
to Stride extensive experience in the property development
and investment industry, particularly in large-scale retail and
commercial developments. Mark’s team collectively have
80 years of property experience and are well placed to deliver
superior performance for the developments undertaken by
SIML’s managed portfolios.
COLLABORATION ON NEW FINANCIAL
MANAGEMENT SOFTWARE
A major initiative
undertaken by SIML during the year in review was
the implementation of new accounting and property
management software called ‘Yardi’. Recognising
the important role that this new software would play
in the daily operations of SIML, from the very start
of the project SIML determined that it would have
its own employees integrated within the project to
deliver a system suited to our business. While many
companies implementing a new software system
rely on contractors and outsourced expertise, SIML
chose to build a team that was a mix of contractors
and employees – and for those employees who were
involved in the project, contractors were engaged to
undertake their day to day roles.
CORPORATE SERVICES TEAM
Stride’s strategy is
to use its expertise to invest in and manage quality property
portfolios that attract the highest demand and deliver market-
leading returns to our shareholders. Two of the three property
funds currently managed by SIML are listed on the NZX.
Accordingly, SIML recognises the need to ensure that it
This meant that the software was implemented in a way that
suited the way we work and our people’s needs. It also gave SIML
employees a great learning and development opportunity, with
our employees having direct hands on experience of an enterprise
software development project. To support the project team a
steering committee was established, which included a Stride
director, John Harvey, as well as the project sponsor, Jennifer
Whooley (SIML CFO) and other members of the SIML team. This
demonstrates the commitment of the entire organisation, from the
Board down, to the successful implementation of this important
software. While the project is ongoing, to date it is on time and on
budget in delivering the key business goals through each phase.
adopts best practice corporate governance, risk and health and
safety practices. A new team was created during the year in review
to provide these services, the Corporate Services team, headed by
Louise Hill. Louise is a very experienced corporate lawyer and has
built a team that includes a health, safety and risk professional and
a lawyer with considerable governance experience.
18
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
People
At Stride, we carefully select, astutely
invest in and manage outstanding places
that reward everyone connected with
them. Our selection of
leverages our investment management,
development and leasing expertise and
experience, to deliver the best investments
and deliver market leading returns.
SPL’s wholly owned portfolio is comprised of commercial
office, industrial and retail properties.
OFFICE PORTFOLIO
The $224 million office portfolio
represents 25% of SPL’s property portfolio and is located in
the key markets of Auckland and Wellington. This portfolio
provides a diversified income stream from sources such as
government agencies and leading corporate customers.
As a result of leasing activity during the year, the portfolio is
99.8% occupied and the weighted average lease term has
increased from 4.3 years as at 31 March 2017 to 5.1 years
as at 31 March 2018.
INDUSTRIAL PORTFOLIO
SPL is an active participant
in the industrial market, with a $217 million portfolio of high
quality properties, all of which are in Auckland, including
development land at 11 Springs Road. There has been
significant growth in market values in recent years, with quality
properties, such as those in SPL’s portfolio, highly sought after
by investors and occupiers. As a result of this high demand
and rental growth, the portfolio is well positioned to capture
the benefits from the high-growth Auckland region.
During the year, we completed the development of a
further industrial site at 15 Rockridge Avenue in Auckland.
At approximately 9,000 square metres in size, this property is
the final building forming part of a wider industrial estate that
has been wholly developed by Stride. This new site has now
been fully leased and is a good example of how we are able
to leverage our strong capability in industrial development.
Nearly half of our industrial portfolio has been developed
using this in-house capability. The Rockridge development,
a $13.1 million
1
development, was completed on time with
a yield on cost (including land) of 7.1% and a $3 million
development profit.
In November, SPL announced a new redevelopment project
with Waste Management NZ Limited (Waste Management) on
the 5.2-hectare industrial site at 11 Springs Road in Auckland.
The redevelopment will involve the demolition of existing site
structures to make way for a purpose built 9,400 square metre
industrial facility for Waste Management. Occupying the entire
site, the development will provide logistics and operational
facilities from which Waste Management can both service
the Auckland market and oversee their national operations.
Completion of the development is targeted for the second
half of the 2019 calendar year, following which Waste
Management will commit to a lease with Stride for an initial
25 year term. The development is forecast to cost $43 million,
and the agreement with Waste Management allows for the
expansion of the scope of works by up to $23 million with an
associated increase in rental.
The portfolio was 94.6% occupied at year end, however
following balance date 15 Rockridge Avenue, Auckland,
was fully leased. If that property had been fully leased
prior to balance date, the industrial portfolio would have been
100% occupied as at 31 March 2018.
Following the completion of the development at Springs
Road, the weighted average lease term of SPL’s industrial
portfolio is projected to increase by approximately 5 years.
RETAIL PORTFOLIO
SPL’s retail portfolio, comprising
both retail centres and stand-alone large format retail, was
valued at $462 million as at 31 March 2018, down from
$495 million in the prior year due to property divestments.
With 93% of our retail centre portfolio located in the high
growth regions of Auckland and Tauranga, and almost two
thirds developed by Stride, we believe these assets are well
positioned to meet enduring demand from retail tenants over
the long term. SIML has been active in delivering high quality,
contemporary development to meet this demand.
During the year, we completed the restructure of the leases
of three large format retail properties occupied by Bunnings,
providing a $9.5 million gain on the 31 March 2017 valuations,
after allowing for all costs and incentives. These properties
were subsequently sold to Investore for $78.5 million. Investore
was initially established by SPL and listed in 2016 and has a
clear investment strategy to acquire a portfolio of large format
retail properties, being a segment of the market that offers
unique investment attributes.
15 ROCKRIDGE AVENUE, AUCKLAND
11 SPRINGS ROAD, AUCKLAND — CONCEPT
1. The development cost of $13.1 million includes costs related to tenancies agreed post balance date.
20
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
PlacesPlaces
Environment — Sustaining Places. We work
closely with the tenants of the properties
we manage to create environments that
reward both occupiers and visitors, in which
businesses can flourish, and which employees
and customers enjoy working in and visiting.
We are also committed to minimising the
environmental footprint of the properties
we own and manage.
Across the three SIML – managed property
portfolios, there are many initiatives that
collectively help to protect and enhance
the environments of individual properties.
These include recycling of rubbish, energy
saving initiatives, and building deeper
engagement with communities.
SPONSORSHIPS
Stride is a proud sponsor of
Keystone New Zealand Property Education Trust which
provides grants to students who would not otherwise be
able to afford tertiary education, with specific emphasis
on education in the property profession. Stride sees
its involvement in the Keystone New Zealand Property
Education Trust as a valuable contribution to educating
quality property professionals for the future.
Stride is also a sponsor of the Graeme Dingle Foundation
(GDF) whose aim is to inspire all school age New Zealand
children to reach their full potential through programmes
that help build self-esteem, promote good values and
which teach valuable life, education and health skills.
COMMUNITY ENGAGEMENT
SIML – managed shopping centres provide valuable
opportunities to connect with and support local
community groups and charitable organisations.
Each year SIML – managed shopping centres
undertake a wide range of initiatives, from allocating
a free community space for schools and charities to
fundraise and build awareness for their organisation,
to Christmas gift-wrapping services with the
proceeds donated to local charities.
RECYCLING
Recycling of waste is a feature
across the SIML – managed shopping centre portfolio,
and we actively recycle cardboard, paper, soft plastics
(plastic bags and film), clear wrap, food waste, glass,
scrap metal, and waste cooking oil from the food court.
NorthWest Shopping Centre recycles over half of the
centre’s waste, and in December 2017 65% of waste
was recycled, reducing amounts going to landfill.
Initiatives included reconfiguring the NorthWest’s food
court, so that customers do not have an option to throw
out waste. Instead, rubbish is collected from customers
and sorted and this enables food waste to be recycled
along with all food packaging.
At the Silverdale Centre, 240 wooden pallets are
recycled each year through Reharvest Timber Products,
who turn the pallets into garden mulch. Silverdale also
partnered with All Heart New Zealand to recycle used
carpet tiles pulled up to make way for a store revamp.
All Heart found a new home for the flooring at an
Auckland marae. Through this initiative we were able
to reduce the volume of waste going to landfill and
support the local community with extra resources.
ENERGY SAVING & SUSTAINABILITY
In newer developments such as NorthWest Shopping
Centre, all lighting installed is LED. For established
centres this requires a commitment to upgrade existing
lighting. This year, the Queensgate Shopping Centre
(managed by SIML) took the initiative to change all
of its one thousand lights in both the shopping centre
and the carpark to LED lighting. LED lights are five times
more efficient than older style lighting systems. This has
been coupled with the use of auto-sensing technology
for lights in non-public areas, and sensors within the
exterior areas of the carpark which regulate the lighting
depending on the sunshine available.
Charging stations for electric vehicles are continuing to
be installed in shopping centres, providing facilities for
customers with electric vehicles to charge their vehicles
while shopping, making it easier for more people to
drive sustainable, electric vehicles.
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
PlacesPlaces
A key strategic priority for Stride is the
creation and management of sustainable
investment
for our investors.
We aim to continue to build on our recently
established track record for promoting real
estate investment management (REIM) products
that are comprehensively researched, evidence
based, and appropriately structured.
Delivering on this strategy is a key way in which we are building
a high performing, sustainable REIM business. Gross revenue
from our REIM business was $21.0 million for the year to 31
March 2018, which represents growth of 60% on the prior year.
More importantly, the margin on revenue was approximately
42%, which compared very favourably with the average property
contract yield on the SPL portfolio of 6.43%.
SIML manages Investore, an NZX listed company which owns
standalone large format retail property with a total portfolio value
of $738 million as at 31 March 2018, and Diversified, which owns
four retail shopping centres with a total portfolio value of
$538 million as at 31 March 2018.
Investore provides a clear example of how Stride’s business model
operates and is the type of fund structure we see for the future.
That framework is based on enduring, quality investment structures
that are purposefully designed to deliver a sustainable, single sector
focused product both to its investors and Stride shareholders.
When Investore was listed in 2016, it was set up with a clear
strategy for our investment management business in mind:
• Investore has a defined single sector mandate, investing
solely in standalone large format retail properties;
• SPL owns a cornerstone shareholding in Investore of 19.9%;
• SPL has committed that its future exposure to standalone
large format retail property will be through its cornerstone
shareholding in Investore;
• Investore has a capital structure designed to hold
investments specifically in this sector;
• SIML, as manager of Investore, was pleased to deliver a 17%
increase
1
in profit after income tax for Investore for the year
to 31 March 2018, compared to the forecast
2
.
We will continue to hold a diversified
set of investments in property across
a range of funds, together with a high
functioning and profitable REIM business
that services these investments. For the
future, we are continuing to investigate
other sectors which might be suitable for
the creation of new investment funds like
Investore.
1. Excluding the $23.7 million fair value gain on investment properties compared to the forecast.
2. As contained within the Product Disclosure Statement issued by Investore on 10 June 2016 and associated information published in the online register maintained
by the Companies Office and the Registrar of Financial Service Providers on 10 June 2016 in conjunction with Investore’s initial public offering of shares.
25
Stride Property Group | Annual Report 2018
24
Stride Property Group | Annual Report 2018
ProductsProducts
Stride Investment Management Limited
Managed Portfolio Information
Stride Property Limited
Owned Portfolio Information
PORTFOLIO VALUATION – OWNED AND MANAGED PROPERTIES
Value of
Investment Properties
1
Number of
Investment Properties
SPL Investment in
Managed Entities
$902m
2
26
3
–
$738m40
19.9%
held by SPL
$538m4
3
2%
held by SPL
Tot al$ 2 ,17 8 m69
3
–
SPL PORTFOLIO LOCATION
BY CONTRACT RENTAL
4
SPL PORTFOLIO VALUE
2
SPL LEASE EXPIRY PROFILE
5
BY CONTRACT RENTAL
4
PORTFOLIO COMPOSITION BY VALUE
1
Commercial Office
Industrial
Large Format Retail
As at 31 March 2017
As at 31 March 2018
Large Format
Retail
Retail Shopping
Centres
77% Auckland
18% Wellington
5% Other North Island
Disposals
Capex and lease incentives
Bunnings lease restructure expenditure
Gain from restructure of Bunnings leases
Revaluation gain
REAL ESTATE INVESTMENT
MANAGEMENT FEE INCOME (NZ$M)
*
Income from externally managed properties
Income from SPL properties
100%
100%
25%
24%
5%
46%
F Y17 F Y18
31 March
2017
31 March
2018
Retail Shopping
Centres
*
Values may not sum accurately due to rounding
$7. 5m
$5.6m
$12.4m
$8.6m
$ 13 .1m
$ 21.0m
FY 2019
8.72%8.68%
FY 2020
10.05%
17. 4 8%
FY 2021
13.55%
15.29%
$895.3m
($78.4m)
$19.0m
$18.0m
$9.5m
$38.8m
$902.2m
4
Contract Rental is the amount of rent payable by each tenant, plus other amounts payable by that tenant under the terms of the relevant lease as at 31 March 2018, annualised for the
12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
5
Represents the scheduled expiry for each lease, excluding any rights of renewal that may be granted under each lease, for the entire portfolio as at 31 March 2018, as a percentage of Contract Rental.
1
Independent valuations as at 31 March 2018.
2
Includes NorthWest Two, Auckland, which is classified as inventory in the financial statements. Refer note 13 to the consolidated financial statements on page 53.
3
Includes Johnsonville Shopping Centre, Wellington, which is owned 50/50 by SPL and Diversified NZ Property Trust.
26
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
SPL Owned Portfolio Information
SIML Managed Portfolio Information
AddressCity
Tenants
(no.)Major Tenant(s)Occupancy
Net
Lettable
Area
(m
2
)
WALT
2
(years)
Valuation
($000)
Net
Contract
Rental
1
($000)
Market
Cap
Rate
Contract
Yield
Office
33 Corinthian DriveAuckland1ASB Bank100.0% 10,936 7.5 47, 350 2,971 6.30%6.28%
7-9 Fanshawe StreetAuckland14IPFX, ClearPoint, Landmark 100.0% 4 , 817 2.4 9,800 1,271 10.25%12.97%
80 Greys AvenueAuckland2DDB New Zealand, Serato100.0% 5,450 1.6 19,700 1,468 7.0 0%7.45%
21-25 Teed StreetAuckland11NZACU, FX Networks,
Kingston Partners
97.9% 4,090 2 .1 21,700 1,529 7.0 0%7.05%
35 Teed StreetAuckland7Heartland Bank, Bed Post100.0% 2, 874 5.5 21,10 0 1,301 6.25%6 .17 %
33 Customhouse QuayWellington8Meridian Energy,
AMP Capital Investors
100.0% 5 , 217 9.2 33,900 2,495 6.75%7.36%
1 Grey StreetWellington17Westpac (NZ) Investments100.0% 10,472 4.4 52,750 3,936 7.50%7.46%
22 The TerraceWellington9Department of Internal Affairs,
Qual IT
100.0% 4,781 3.6 17, 25 0 1,358 7.88%7.87%
O f fice Total6999.8% 48,637 5 .1 223,550 16,329 7.07 %7. 30%
Industrial
30 Airpark DriveAuckland1DHL100.0% 13,733 1.7 22,600 1,404 6.63%6.21%
22 Ha CrescentAuckland1Tasman Liquor Company100.0% 8,757 3.3 13,60 0 772 6 .13%5.67%
8 Reg Savory PlaceAuckland1National Glass100.0% 4,025 5.4 7,70 0 490 6.00%6.36%
20 Rockridge AvenueAuckland1NZ Merchants100.0% 10,239 2.5 14,70 0 859 6.63%5.84%
460 Rosebank RoadAuckland5French Country Collections,
Aeroqual
100.0% 12,265 3.8 16 ,10 0 1,141 6.88%7.09%
15 Rockridge AvenueAuckland1Checkpoint NZ39.0% 8,991 10.0 21,500 406 5.63%1.89%
25 O’Rorke RoadAuckland5Laminex, AA Insurance, Hydraulink100.0% 27,086 5.0 64,000 3,708 5.88%5.79%
415 East Tamaki DriveAuckland1Goodyear & Dunlop Tyres (NZ)100.0% 9,727 3.0 17,10 0 1,16 0 6.38%6.78%
15 Ride WayAuckland1New Zealand Post100.0% 6,027 5.4 11, 2 0 0 644 5.75%5.75%
34 Airpark DriveAuckland1MPI International100.0% – 9.8 7,20 0 252 4.88%3.50%
Industrial Total1894.6% 100,852 4.3 195,700 10,836 6 .10 %5.54%
OverviewAs at 31 March 2018As at 31 March 2017
Properties (no.) 26 29
Tenant s (no.) 379 380
Net Lettable Area (m
2
) 251, 953 30 4,714
Net Contract Rental
1
($m) 56.7 62.6
WALT
2
(years) 5 .1 4.9
Occupancy Rate (% by area) 96.7 96.8
Portfolio Value ($m)
3
902.2 895.3
Totals may not sum due to rounding. The occupancy %, WALT, market cap rate and contract yield for the property class and overall totals are a weighted average.
1
Contract Rental is the amount of rent payable by each tenant, plus other amounts payable by that tenant under the terms of the relevant lease as at 31 March 2018,
annualised for the 12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
2
Weighted Average Lease Term (WALT).
3
Includes NorthWest Two, Auckland, which is classified as inventory in the consolidated financial statements. Refer note 13 to the consolidated financial statements
on page 53.
4
This calculation excludes the value of land/development and NorthWest Two.
AddressCity
Tenants
(no.)Major Tenant(s)Occupancy
Net
Lettable
Area
(m
2
)
WALT
2
(years)
Valuation
($000)
Net
Contract
Rental
1
($000)
Market
Cap
Rate
Contract
Yield
Retail
Cnr Mt Wellington Highway
& Penrose Road
Auckland22Countdown, Super Cheap Auto97.1% 9 , 011 2.4 36,300 2,492 6.75%6.86%
Johnsonville Shopping
Centre (50%)
Wellington81Specialty Retail90.3% 6,924 3.0 30,660 1,928 7.75%6.29%
61 Silverdale StreetAuckland36Countdown, The Warehouse98.9% 22,951 5.4 98,400 6 ,121 6.50%6.22%
65 Chapel StreetTauranga28Rebel Sport, Briscoes100.0% 16,592 3.0 41, 50 0 3,240 7.63%7. 81%
NorthWest Shopping
Centre
Auckland101Countdown, Farmers96.2% 27,465 6 .1 176,000 10,855 6.38%6 .17 %
NorthWest TwoAuckland23Constellation Brands92.0% 7,920 6.4 36, 277 2,589 – 7.14%
Retail Total29196.9% 90,864 5 .1 419,137 27, 224 6.69%6.50%
Large Format Retail
2 Carr RoadAuckland1Bunnings100.0% 11, 6 01 8.9 42,750 2,279 5 .13%5.33%
Large Format Retail Total1100.0% 11, 6 01 8.9 42,750 2,279 5 .13%5.33%
Land/Development
11 Springs RoadAuckland – – – – 21,10 0 – – -
Land/Development Total –– – – 21,100 – – –
Total Portfolio379 96.7% 251,953 5 .1 902,237
3
56,668 6.57%
4
6.43%
Stride Property Limited Portfolio 2018
28
29
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Portfolio 2018Portfolio 2018
Consolidated Statements
Comprehensive Income 32
Changes in Equity 33
Financial Position 34
Cash Flows 35
Notes to the Consolidated Financial Statements 36
Independent Auditor’s Report 72
FINANCIAL STATEMENTS
30
Financial Statements
31
Stride Property Group | Annual Report 2018
Consolidated statement of changes in equity
For the year ended 31 March 2018
Consolidated statement of comprehensive income
For the year ended 31 March 2018
Notes
Share
capital
$000
Retained
earnings
$000
Other
reserves
$000
Tot al
$000
Balance at 31 Mar 16 633,449 96,340 (10,373)719,416
Transactions with shareholders:
Demerger of shares in Investore Property Limited (134,155)––(134,155)
Dividends paid9– (37,502)–(37,502)
Share issue expenses (2)––(2)
Transfer to share capital on vesting of employee
long term incentive plan
682– (682)–
Share based payment expense20
–– 518518
Total transactions with shareholders (133,475) (37,502) (164)(171,141)
Other comprehensive income:
Movement in cash flow hedges, net of tax20–– 5,2165,216
Change in cash flow hedge reserve in associates20
–– 1,0331,033
Total other comprehensive income
–– 6,2496,249
Profit after income tax
– 53,334–53,334
Total comprehensive income– 53,334 6,24959,583
Balance at 31 Mar 17 499,974 112,172 (4,288)607,858
Transactions with shareholders:
Dividends paid9– (35,988)–(35,988)
Transfer to share capital on vesting of employee long
term incentive plan
231–(231)–
Share based payment expense20
–– 526526
Total transactions with shareholders231 (35,988) 295(35,462)
Other comprehensive income:
Movement in cash flow hedges, net of tax20–– (28)(28)
Change in cash flow hedge reserve in associates20
–– (474)(474)
Total other comprehensive income
–– (502)(502)
Profit after income tax
– 95,254–95,254
Total comprehensive income– 95,254 (502)94,752
Balance at 31 Mar 18
500,205 171,438 (4,495)667,148
The attached notes form part of and are to be read in conjunction with these financial statements.The attached notes form part of and are to be read in conjunction with these financial statements.
Notes
2018
$000
2017
$000
Rental income 65,29564,564
Non-recoverable property operating expenses
(7,685)(6,634)
Net rental income4
57,61057,930
Management fee income13,2758 , 541
Less corporate expenses
Corporate overhead expenses(10,415)(8,976)
Administration expenses(3 , 411)(3,026)
One-off project costs
–(3 , 510)
Total corporate expenses6(13,826)(15, 512)
Profit before net finance expenses, other income/(expenses) and
income tax from continuing operations
57,05950,959
Finance income345327
Finance expenses
(16,662)(17,157 )
Net finance expenses7(16,317 )(16,830)
Profit before other income/(expenses) and income tax from
continuing operations
40,74234 ,129
Other income/(expenses)
Net change in fair value of investment properties1148,34122,484
Share of profit in associates149,4365,358
Other income – insurance recoveries52,276–
Loss on disposal of investment properties11–(18)
Net change in fair value of other investments
–121
Profit before income tax from continuing operations
100,79562 ,074
Income tax expense17
(5,541)( 7, 871)
Profit after income tax from continuing operations
95,25454,203
Loss from discontinued operations3
–(869)
Profit attributable to shareholders
95,25453,334
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Movement in cash flow hedges, net of tax20(28)3 ,166
Changes in cash flow hedge reserve in associates20(474)1,033
Other comprehensive income arising from discontinued operations20
–2,050
Total other comprehensive (loss)/income after tax(502)6,249
Total comprehensive income after tax attributable to shareholders
94,75259,583
SPL total comprehensive income after tax attributable to shareholders88,51954,745
SIML total comprehensive income after tax attributable to shareholders
6,2333,657
Total comprehensive income after tax attributable to shareholders
from continuing operations
94,75258,402
Total comprehensive income after tax from discontinued operations
–1,181
Total comprehensive income after tax attributable to shareholders
94,75259,583
Earnings per share from continuing operations 20
Basic earnings per share (cents)2 6 .1014. 87
Diluted earnings per share (cents)26.0614. 85
Earnings per share from continuing and discontinued operations 20
Basic earnings per share (cents)2 6 .1014.63
Diluted earnings per share (cents)26.0614.61
32
Financial StatementsFinancial Statements
33
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Consolidated statement of financial position
As at 31 March 2018
Notes
2018
$000
2017
$000
Current assets
Cash and cash equivalents10,21 10,0065,961
Trade and other receivables15,21,22 1,8861,854
Prepayments 212331
Other current assets 196158
Inventory – development property 13
36,27736,247
48,5774 4 , 551
Non-current assets
Investment properties11 865,960859,045
Work in progress12 1,9121,349
Other investments14 89,97885,338
Loan to associate14 3,3973,397
Intangible asset 1,09774
Property, plant and equipment
824906
963,168950,109
Total assets 1,011,745994,660
Current liabilities
Trade and other payables16,21 14,45015,620
Current tax 1,14 41, 817
Derivative financial instruments18,21
4,6161,264
20,21018,701
Non-current liabilities
Bank borrowings19,21 307, 365347,021
Deferred tax liability17 13,42714 ,173
Derivative financial instruments18,21
3,5956,907
324,387368 ,101
Total liabilities 344,597386,802
Net assets
6 6 7,14 8607, 858
Share capital20 500,205499, 974
Retained earnings 171,438112 ,17 2
Reserves20
(4,495)(4,288)
Equity
6 6 7,14 8607, 858
SPL equity 665,316607,0 4 4
SIML equity (non-controlling interest)
1,832814
Equity
6 6 7,14 8607, 858
For and on behalf of the Board of Directors of Stride Property Limited (SPL) and Stride Investment Management Limited
(SIML), dated 30 May 2018:
TIM STOREY
Chairman
JOHN HARVEY
Director, Chair of the Audit and Risk Committee
Consolidated statement of cash flows
For the year ended 31 March 2018
Notes
2018
$000
2017
$000
Cash flows from operating activities
Rent received64,639 72,500
Management fee income20,767 8,757
Interest received293 285
Other income received – insurance recoveries1,845–
Dividends received– 4
Interest paid (16,705) (18,939)
Operating expenses (24,856) (19,10 8)
Goods and services tax (12) 86
Income tax paid
(6,946) (8,656)
Net cash provided by operating activities10 39,025 34,929
Cash flows from investing activities
Proceeds from disposal of investment properties 77,994 70,337
Dividend income from investments 4,322 1,827
Lease restructure expenditure (18,000)–
Capital expenditure on investment properties ( 2 0 ,114) (6,768)
Inventory – development property expenditure(2,206) (23,799)
Intangible asset expenditure (988)–
Property, plant and equipment purchased (200) (408)
Acquisition of investments
– (12,440)
Net cash provided by investing activities 40,808 28 ,749
Cash flows from financing activities
Drawdown on bank borrowings 38,200 46 ,152
Repayment of bank borrowings (78,000) (71,450)
Dividends paid (35,988) (37, 502)
Share issue expenses
– (3)
Net cash applied to financing activities (75,788) (62,803)
Net increase in cash and cash equivalents held 4,045 875
Opening cash and cash equivalents
5,961 5,086
Closing cash and cash equivalents
10,006 5,961
The attached notes form part of and are to be read in conjunction with these financial statements. The attached notes form part of and are to be read in conjunction with these financial statements.
34
Financial StatementsFinancial Statements
35
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Notes to the consolidated financial statements
For the year ended 31 March 2018
NOTE 1: ACCOUNTING POLICIES
Reporting entity
The consolidated financial statements (financial statements) presented are those of Stride Property Limited (SPL) and
Stride Investment Management Limited (SIML), each of SPL and SIML being a “Stapled Entity”, and together the Stride
Property Group (Stride). For accounting purposes, stapling gives rise to the combination of stapled entities into a
consolidated group. For the purposes of financial reporting, one of the combining entities is required to be identified as
the parent entity of the consolidated group. In the case of Stride, SPL has been identified as the parent for the purposes
of preparing the consolidated financial statements.
SPL is principally involved in the ownership of investment properties in New Zealand and SIML is principally involved in
the management of real estate investment entities in New Zealand. SPL and SIML are both domiciled in New Zealand, are
both registered under the Companies Act 1993 and are both FMC reporting entities under Part 7 of the Financial Markets
Conduct Act 2013.
Shares of SPL and SIML are stapled and quoted on the Main Board equity securities market of NZX under the ticker
code SPG.
The financial statements were approved for issue by the Board of Directors of SPL (SPL Board) and the Board of Directors
of SIML (SIML Board), together the “Boards”, on 30 May 2018.
Basis of preparation
The financial statements have been prepared in accordance with New Zealand Generally Accepted Accounting Practice
(NZ GAAP). Stride is a for-profit entity for the purposes of financial reporting. The financial statements comply with New
Zealand Equivalents to International Financial Reporting Standards (NZ IFRS), other New Zealand accounting standards
and authoritative notices that are applicable to entities that apply NZ IFRS. The financial statements also comply with
International Financial Reporting Standards (IFRS). The financial statements were prepared in accordance with the
Financial Markets Conduct (Stride Property Group) Exemption Notice 2017 and waivers granted to Stride from certain
of the NZX Main Board Listing Rules, which permit SPL and SIML, subject to the conditions of the exemption notice, to
prepare financial statements in respect of Stride in place of separate financial statements of each Stapled Entity.
The financial statements have been prepared using the New Zealand Dollar functional and reporting currency and have
been rounded to the nearest thousand dollars ($000), unless stated otherwise.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain
classes of assets and liabilities as identified in the following specific accounting policies and the accompanying notes.
NOTE 1: ACCOUNTING POLICIES (CONTINUED)
New standards, amendments and interpretations
The new standards, amendments to published standards, and interpretations which may impact Stride and which are
mandatory for Stride’s financial periods beginning on or after 1 April 2018 or later periods, but which Stride has not
adopted early, are as follows:
New standards, amendments and interpretations have been published that are not yet effective and have not been early
adopted by Stride. Those which may be relevant to Stride are explained below:
– NZ IFRS 9: Financial Instruments addresses the classification, measurement and recognition of financial assets and
financial liabilities and replaces the guidance in NZ IAS 39 Financial Instruments – Recognition and Measurement.
Stride has loans and receivables and non-derivative financial assets (note 21) at amortised cost. SPL also has interest
rate swaps in cash flow hedges.
NZ IFRS 9 is required to be adopted by Stride in the financial statements for the year ending 31 March 2019. Given the
nature of the financial assets and financial liabilities held and cash flow hedging undertaken, from the initial assessment
performed, the impact of NZ IFRS 9 will likely be minimal.
– NZ IFRS 15: Revenue from contracts with customers deals with revenue recognition and establishes principles for
reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of
revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer
obtains control of a good or service and therefore has the ability to direct the use and obtain the benefits from the
good or service.
The majority of the revenues of SPL is derived from the rental income from lease agreements with tenants of its
investment properties. Accounting for lease income is out of scope of NZ IFRS 15. However, certain non-rental income
streams, such as recovery of property operating expenses, are within scope of NZ IFRS 15. SIML’s revenue is derived
from management fees (note 22), which is within scope of NZ IFRS 15.
NZ IFRS 15 is required to be adopted by Stride in the financial statements for the year ending 31 March 2019. Based on
the initial assessment performed, the impact of NZ IFRS 15 is likely to be minimal.
– NZ IFRS 16: Leases replaces the current guidance in NZ IAS 17 Leases and requires a lessee to recognise a lease
liability reflecting future lease payments and a “right-of-use” asset for most lease contracts.
Given that SPL is the lessor for the majority of its leases, NZ IFRS 16 is not expected to have significant impact on how
SPL currently accounts for its leases. However, SPL is the lessee on four investment properties (note 25) and therefore
SPL may recognise a right of use asset and lease liabilities in accordance with the new leasing standard.
The standard is effective for accounting periods beginning on or after 1 January 2019. Stride intends to adopt NZ IFRS
16 effective from 1 April 2019.
There are no other standards, amendments and interpretations that are not yet effective and that would be expected to
have a material impact on Stride in the current or future reporting periods and on foreseeable future transactions.
36
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
37
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 2: OPERATING SEGMENTS
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker has been identified as the respective Board of each of SPL and
SIML, as each makes all key strategic resource allocation decisions (such as those concerning acquisition, divestment and
significant capital expenditure). Stride consists of two operating segments, being SPL and SIML.
SPL’s revenue streams are earned from investment properties owned in New Zealand, with no specific exposure to
geographical risk. Given SPL’s diverse client base, no one tenant represents greater than 10% of the portfolio contract
rental. SIML’s revenue streams are earned from the management of the real estate investment of Investore, Diversified
NZ Property Trust (Diversified Trust) and SPL. For the revenue earned from these entities, refer note 22 on related party
disclosures.
The following is an analysis of Stride’s results, by reportable segments, from continuing operations. Management fees
paid from SPL to SIML are eliminated on consolidation and therefore do not appear in the consolidated statement of
comprehensive income for Stride.
Segment profit
SPL
$000
SPL
eliminations
$000
SIML
$000
SIML
eliminations
$000
2018
$000
Net rental income 56,597 1,013––57,610
Management fee income–– 20,989 ( 7,714)13, 275
Less corporate expenses
Corporate overhead expenses 29– (10,444)–(10,415)
Administration expenses
( 7,147 ) 5,487 (1,751)–( 3 , 411)
Total corporate expenses ( 7,118 ) 5,487 (12 ,195 )–(13,826)
Profit before net finance expenses, other income
and income tax
49,479 6,500 8,794 ( 7,714)57,059
Finance income 335– 10–345
Finance expenses
(16,644)– (18)–(16,662)
Net finance expenses (16,309)– (8)–(16 , 317 )
Profit before other income and income tax 3 3 ,170 6,500 8,786 ( 7,714)40,742
Other income
Net change in fair value of investment properties 47,18 8 1,153––4 8 , 341
Other income – insurance recoveries 2,276–––2,276
Share of profit in associates
9,436–––9,436
Profit before income tax
92,070 7,653 8,786 ( 7,714)100,795
Income tax expense
(2,988)– (2,553)–(5, 541)
Profit after income tax attributable to
shareholders
89,082 7,653 6,233 ( 7,714)95,254
Total other comprehensive income after tax
(502)–––(502)
Total comprehensive income after tax attributable
to shareholders
88,580 7,653 6,233 ( 7,714)94,752
In the current period a revaluation movement of $1,152,701 (2017: $215,953) arising from the elimination of the
development fees and disposal fees charged by SIML to SPL has been reflected in the consolidated statement of
comprehensive income.
During the year $60,339 in development fees were charged by SIML to SPL of which:
• $18,456 was in relation to NorthWest Two, Auckland, and has been eliminated from the inventory value in the
consolidated statement of financial position; and
• $41,883 was in relation to Springs Road, Auckland, and has been eliminated from the work in progress value in the
consolidated statement of financial position.
NOTE 1: ACCOUNTING POLICIES (CONTINUED)
Significant accounting judgements, estimates and assumptions
In the application of NZ IFRS, the Boards and management are required to make judgements, estimates and assumptions
about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and
associated assumptions are based on experience and other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements. Actual results may differ from the estimates,
judgements and assumptions made by the Boards and management.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future periods affected.
Judgements made by management in the application of NZ IFRS that have significant effects on the financial statements
and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant
notes to the financial statements.
In particular, information about areas of estimation uncertainty that have the most significant effect on the amount
recognised in the financial statements is disclosed in the relevant notes as follows:
• Investment properties (note 11); and
• Deferred tax (note 17).
Changes in accounting policies
There have been no changes in accounting policies from the prior period and all policies have been applied consistently
throughout the year.
Significant events and transactions
The financial position and performance of Stride was affected by the following events and transactions that occurred
during the reporting period:
Leases restructured and investment property disposals
SPL restructured the leases at three properties occupied by Bunnings Limited (Bunnings) located in Hamilton, Rotorua
and Palmerston North in advance of the expiry date. As a part of the lease restructures, Bunnings received a payment of
$18 million on termination of the old leases and commencement of the new leases.
With the new lease arrangements in place, SPL reached an agreement with Investore Property Limited (Investore), for
Investore to purchase the three Bunnings operated properties for $78.5 million. On reclassification of these properties to
held for sale, the properties were revalued in SPL to fair value, increasing by $9,515,198. Settlement occurred on
28 February 2018.
38
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
39
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 2: OPERATING SEGMENTS (CONTINUED)
Segment profit
SPL
$000
SPL
eliminations
$000
SIML
$000
SIML
eliminations
$000
2017
$000
Net rental income 57,789 141––57,930
Management fee income 194– 13,084(4,737)8,541
Less corporate expenses
Corporate overhead expenses (561)– (8,415)–(8,976)
Administration expenses (7,071) 4,913 (868)–(3,026)
One-off project costs
(3,277)– (233)–(3,510)
Total corporate expenses (10,909) 4,913 (9,516)–(15,512)
Profit before net finance expenses,
other income/(expenses) and income tax
47,074 5,054 3,568(4,737)50,959
Finance income 320 (1,145) 1,152–327
Finance expenses
(17,157)–––(17,157)
Net finance expenses (16,837) (1,145) 1,152–(16,830)
Profit before other income/(expenses) and
income tax
30,237 3,909 4,720(4,737)34,129
Other income/(expenses)
Net change in fair value of investment properties 22,268 216––22,484
Loss on disposal of investment properties (18)–––(18)
Net change in fair value of other investments 121–––121
Share of profit in associates
5,358–––5,358
Profit before income tax
57,966 4,125 4,720(4,737)62,074
Income tax expense
(6,808)– (1,063)–( 7, 871)
Profit after income tax attributable to
shareholders
51,158 4,125 3,657(4,737)54,203
Total other comprehensive income after tax
4,199–––4,199
Total comprehensive income after tax
attributable to shareholders
55,357 4,125 3,657(4,737)58,402
Segment assets and liabilities
SPL
$000
SPL
eliminations
$000
SIML
$000
SIML
eliminations
$000
Total
$000
31 Mar 18
Total assets 1,007,345(673) 5,346(273)1,011,745
Total liabilities 341,356(273) 3,514–344,597
31 Mar 17
Total assets 992,409 (612) 2,958(95)994,660
Total liabilities 384,753 (95) 2,144–386,802
As at 31 March 2018 Stride had assets of $93,376,344 relating to other investments and loan to associates (note 14)
which increased by $4,640,000 from the prior year. SIML capitalised costs of $1,096,995 relating to its accounting
software during the year.
NOTE 3: DISCONTINUED OPERATIONS
The demerger of Investore Property Limited (Investore)
The demerger of Investore from SPL occurred on 11 July 2016 by SPL distributing the ordinary shares that it held in
Investore to SPL shareholders. This is referred to as an in specie distribution. No consideration was payable by SPL
shareholders for the distribution of Investore shares to them by SPL under the demerger (i.e. those Investore shares were
distributed to shareholders for no additional consideration). This is treated as a capital reduction. The share issue ratio was
one share in Investore for every four shares held in SPL. SPL has retained a 19.9% holding in Investore.
The fair value of the Investore shares obtained by shareholders under the demerger was calculated by reference to the
share price of Investore under its initial public offering. This was equal to the fair value of net assets demerged.
NOTE 4: NET RENTAL INCOME
Rental income from investment properties is recognised on a straight-line basis over the lease term. Lease incentives
provided in relation to letting the investment properties are amortised on a straight-line basis over the non-cancellable portion
of the lease to which they relate, as a reduction of rental income. Where a lease provides for fixed rental increases over the
term of the lease, they are amortised on a straight-line basis over the non-cancellable portion of the lease to which they relate.
SPL
2018
$000
2017
$000
Rental income65,22165,205
Capitalised lease incentives855649
Lease incentive amortisation(792)(1,024)
Spreading of fixed rental income amortisation
11(266)
Total rental income from continuing operations
65,29564,564
Rental income from discontinued operations
–
6,232
Rental income from continuing and discontinued operations
65,29570,796
Leases are classified at their inception as either operating or finance leases based on the economic substance of the
agreement so as to reflect the risks and rewards incidental to ownership. Leases in which a significant portion of the risks
and rewards of ownership are retained by the lessor are classified as operating leases. SPL has determined that it retains all
significant risks and rewards of ownership of the leases and has therefore classified the leases as operating leases. Property
leased out under operating leases is included in investment property in the consolidated statement of financial position.
The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:
From continuing and discontinued operations
2018
$000
2017
$000
No later than 1 year 57, 82362,564
Later than 1 year and no later than 5 years 159,751170 , 6 81
Later than 5 years
100,71799, 274
Future rentals receivable from continuing and discontinued operations
318,291332 , 519
Recoverable operating expenses are classified as a reduction of expenses instead of other income.
Non-recoverable property operating expenses
2018
$000
2017
$000
Direct property operating expenses(13,707)(13,051)
Service charge income recovered from tenants13,70713,051
Other non-recoverable property expenses
(7,685)(6,634)
Total non-recoverable property operating expenses
(7,685)(6,634)
Other non-recoverable property operating expenses represents property maintenance and operating expenses not
recoverable from tenants, property valuation fees and property leasing costs.
40
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
41
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 5: OTHER INCOME – INSURANCE RECOVERIES
On 26 May 2017, the SPL property at 7-9 Fanshawe Street, Auckland, sustained fire damage. A full reinstatement claim was made
and accepted by its insurers and during the year SPL received reinstatement and rent abatement insurance payments totalling
$1,833,997. A further receivable of $421,250 (excluding GST) has been recognised representing the balance of fire-related
claims. This amount has been classified as trade and other receivables in the consolidated statement of financial position.
NOTE 6: CORPORATE EXPENSES
2018
$000
2017
$000
Corporate overhead expenses include:
Salaries and other short-term benefits 6,8865,857
Depreciation expense 282233
Intangible asset amortisation 53–
Administration expenses include:
Auditors’ remuneration
– Audit and review of financial statements256176
– Other assurance services – share register audit –3
– Other assurance services – tenancy marketing and operating expenses 2724
– Other services – management contract assessment –32
– Other services – accounting advice –30
– Other services – workshop attendance and market reports –4
Share based payment expense (note 20) 526518
One-off project costs –3 , 510
The one-off project costs in 2017 related largely to advisor fees of $3,277,000 in connection with the demerger of
Investore from SPL and the offer of shares by Investore under the IPO. Included in these fees is an amount of $550,183
paid to PricewaterhouseCoopers for financial due diligence.
NOTE 7: NET FINANCE EXPENSES
Interest income is recognised on a time-proportional basis using the effective interest rate.
Where SPL borrows funds specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs capitalised
are the actual borrowing costs incurred on that borrowing, less any investment income on the temporary investment of those
borrowings. A qualifying asset is one that takes six months or longer to prepare for its intended use or sale. Where SPL borrows
funds generally and uses them to fund a qualifying asset, the amount of borrowing costs capitalised is determined by applying
a capitalisation rate to the expenditure on that asset. The capitalisation rate is the weighted average of the borrowing costs
applicable to the borrowings that are outstanding during the period, other than borrowings made specifically for the purpose of
funding a qualifying asset. As at 31 March 2018, $215,677 (2017: $426,374) of borrowing costs have been capitalised using an
average capitalisation rate of 3.3% including line fee and margin cost (2017: 3.8%).
Other borrowing costs are expensed when incurred and are recognised using the effective interest rate.
SIML does not have any bank borrowings.
2018
$000
2017
$000
Finance income
– Bank interest income106280
– Other finance income
23947
Finance income from continuing operations345327
Finance expenses
– Bank borrowings interest(16,878)(17, 5 8 3)
– Capitalised interest
216426
Finance expenses from continuing operations(16,662)(17,157 )
Net finance expenses from continuing operations(16,317 )(16,830)
Net finance expenses from discontinued operations
–
( 2 , 211)
Net finance expenses from continuing and discontinued operations
(16,317 )(19, 0 41)
NOTE 8: DISTRIBUTABLE PROFIT
Stride’s dividend policy is to target a cash dividend to shareholders that is between 95% and 100% of its distributable
profit. Distributable profit is a non-GAAP measure and consists of net profit or loss before income tax, adjusted for
non-recurring and/or non-cash items, share of profits in associates, dividends received from associates and current tax.
2018
$000
2017
$000
Profit before income tax (including discontinued operations note 3) 100,79565,485
Non-recurring and non-cash adjustments:
– Net change in fair value of investment properties
(48,341)(22,484)
– Share of profit in associates
(9,436)(5,358)
– Dividend income from associates
4,3221,827
– Net rent free incentives
(63)(266)
– Net lease contribution incentives
484425
– Spreading of fixed rental income amortisation
(11)191
– Share based payment expense
526518
– Depreciation expense
282233
– Refinancing cost amortisation
147 717
– Intangible asset amortisation
53–
– Development fee income
821828
– Disposal fee income
393–
– Other income – insurance recoveries
(1,600)–
– Loss on disposal of investment properties
–
18
– Net change in fair value of other investments
–
(121)
– One-off project costs
–
3 , 510
Distributable profit before current income tax
48,372 45,523
Current tax expense (6,276) (9,963)
Adjusted for:
– Tax expense on capitalised interest
(60) (119 )
– Tax expense on depreciation recovered on disposal of investment properties
1,797 2,828
– Tax expense on lease restructure
(5,040)–
– Current tax expense on pre-demerger Investore profit
–
(619)
Distributable profit after current income tax
38,79337,650
Adjustments to funds from operations:
– Maintenance capital expenditure
(5,526)(5,810)
Adjusted Funds From Operations (AFFO)
33,26731,840
Weighted average number of shares for purpose of basic distributable profit
per share (000)
364,969364,443
Basic distributable profit after current income tax per share –
weighted (cents)
10.6310.33
AFFO basic distributable profit after current income tax per share –
weighted (cents)
9.128 .74
Weighted average number of shares for purpose of diluted distributable profit
per share (000)
365,537365,021
Diluted distributable profit after current income tax per share –
weighted (cents)
10.6110.31
AFFO diluted distributable profit after current income tax per share –
weighted (cents)
9.108.72
The weighted average number of shares for the purpose of diluted distributable profit per share has been adjusted for
747,442 (2017: 564,914) rights issued under SPL’s long term share incentive schemes.
42
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
43
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 9: DIVIDENDS PAID AND PROPOSED
Dividends are recognised as a liability in the financial statements in the period in which the dividends are approved.
The following dividends were declared and paid by SPL during the year:
2018
$000
2017
$000
Q4 2017 Final dividend 2.10 cents (Q4 2016 2.75 cents) 7,66610,023
Q1 2018 Interim dividend 2.07 cents (Q1 2017 2.72 cents) 7,5559,913
Q2 2018 Interim dividend 2.07 cents (Q2 2017 2.02 cents) 7,5557, 362
Q3 2018 Interim dividend 2.07 cents (Q3 2017 2.02 cents)
7,5557, 362
Total dividends paid
30,33134,660
Dividend approved subsequent to balance date:
Q4 2018 Final dividend 2.00 cents (Q4 2017 2.10 cents) (note 27).
Supplementary dividends of $94,572 (2017: $166,963) were paid to SPL shareholders not resident in New Zealand for
which SPL received a foreign investor tax credit entitlement.
The following dividends were declared and paid by SIML during the year:
2018
$000
2017
$000
Q4 2017 Interim dividend 0.32 cents 1,16 6 –
Q1 2018 Interim dividend 0.41 cents 1,497 –
Q2 2018 Interim dividend 0.41 cents (Q2 2017 0.39 cents) 1,4971,421
Q3 2018 Interim dividend 0.41 cents (Q3 2017 0.39 cents)
1,4971,421
Total dividends paid
5,6572,842
Dividend approved subsequent to balance date:
Q4 2018 Final dividend 0.47 cents (Q4 2017 0.32 cents) (note 27).
Supplementary dividends of $28,959 (2017: $19,846) were paid to SIML shareholders not resident in New Zealand for
which SIML received a foreign investor tax credit entitlement.
NOTE 10: STATEMENT OF CASH FLOWS RECONCILIATION
Cash and cash equivalents include cash in hand and deposits held at call with banks. These assets are short term in nature
and the carrying value is approximate to their fair value. Cash and cash equivalents are classified as loans and receivables.
They are subsequently measured at amortised cost.
2018
$000
2017
$000
Cash and cash equivalents3326
Cash at bank
9,9735,935
Cash on deposit
10,0065,961
The below reconciliation relates to both continued and discontinued operations:
Reconciliation of profit after income tax attributable to shareholders to
net cash provided by operating activities:
Profit after income tax 95,25453,334
Add/(less) non-cash items:
Movement in deferred tax (note 17) (735)(2,092)
Net change in fair value of investment properties (48,341)(22,484)
Share of profit in associates (9,436)(5,358)
Capitalised lease incentives (63)(1, 351)
Lease incentive amortisation 4841,509
Spreading of fixed rental income amortisation (11)191
Depreciation expense 282233
Amortisation of borrowing costs 147717
Amortisation of intangible asset 53–
Movement in impairment provision (note 15) 21767
Development fee income 821216
Disposal fee income 393–
Share based payment expense 526518
Cash flow hedge reserve reclassification on demerger–3,550
Loss on disposal of investment properties–18
Net change in fair value of other investments
–
(121)
39,59128,947
Add activities classified as investing activity:
Capitalised expenditure on investment properties
1,4454,247
41,03633 ,194
Movement in working capital:
Increase in trade and other receivables (249)(941)
Decrease in prepayments and other current assets 81387
(Decrease)/increase in trade and other payables (1,170)1,172
(Decrease)/increase in tax payable
(673)1,117
Net cash provided by operating activities
39,02534,929
44
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
45
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 11: INVESTMENT PROPERTIES (CONTINUED)
Capital expenditure commitments contracted for
As at 31 March 2018, SPL had committed to $2,130,794 (2017: $1,759,031) in total for various capital expenditure works to
be undertaken on a number of investment properties in the next financial year.
Valuation basis
The fair value of an investment property represents the estimated price for which an investment property could be sold on
the date of valuation in an orderly transaction between market participants.
The accepted methods for assessing the current fair value of an investment property are the Income Capitalisation and
the Discounted Cash Flow approaches. Valuations of investment properties which are not yet complete are based on an
independent valuer’s assessment of the fair value at completion and adjusted to reflect the stage of completion of a project
and the costs to complete.
Each approach derives a value based on market inputs, including:
• recent comparable transactions;
• forecast future rentals, based on the actual location, type and quality of the investment properties, and supported by the
terms of any existing lease, other contracts or external evidence such as current market rents for similar properties;
• vacancy assumptions based on current and expected future market conditions after expiry of any current lease;
• maintenance and capital requirements including necessary investments to maintain functionality of the property for its
expected useful life; and
• appropriate discount rates derived from recent comparable market transactions reflecting the uncertainty in the amount
and timing of cash flows.
The Income Capitalisation approach is based on the current contract and market income and an appropriate market yield or
return for the particular investment property. Capital adjustments are then made to the value to reflect under or over renting,
pending capital expenditure, and upcoming expiries, including allowance for lessee incentives and leasing costs.
The Discounted Cash Flow approach adopts a ten year investment horizon and makes appropriate allowances for rental
income growth and leasing costs on expiries, with an estimated terminal value at the end of the investment period.
The present value is a reflection of market based income (inflows) and expenditure (outflows) projections over the ten
year period, discounted at a rate of return referred to as a discount rate. In selecting the discount rate at which cash flows
are to be present valued, many factors are considered, including the degree of apparent risk, market attitudes toward
future inflation, the prospective rates of return for alternative investments and the rates of return earned by comparable
properties in the past.
An additional approach, Stratum Estates Capitalisation Approach, has been used for assessing the fair value of 65 Chapel
Street, Tauranga. This method assesses the investment property value having regard to its potential to be divided into
individual Stratum Estates. Consideration is given to the price each Stratum Estate is likely to achieve, with costs deducted
for capital expenditure, agency costs, and profit and risk.
In deriving a market value under each approach, all assumptions are based, where possible, on market based evidence
and transactions for properties with similar locations, construction detail and quality of lessee covenant. The adopted
market value is a combination of both the Income Capitalisation and the Discounted Cash Flow approaches. In the case
of 65 Chapel Street, Tauranga, the adopted market value also includes a weighting for the Stratum Estates Capitalisation
Approach.
The valuations are performed by independent registered valuers who hold an annual practising certificate with the Valuers
Registration Board and are members of the New Zealand Institute of Valuers. Valuers are engaged on terms ensuring no
valuer values the same investment property for more than three consecutive years. In the current year, the investment
properties have been valued by CIVAS Limited (Colliers), Colliers International (Wellington Valuation) Limited (Colliers
Wellington), CBRE Limited (CBRE), Jones Lang LaSalle Limited (JLL) and Bayleys Valuations Limited (Bayleys). All valuations
are dated effective 31 March.
NOTE 11: INVESTMENT PROPERTIES
Investment properties comprise land, buildings and improvements that are held either to earn rental income or for capital
appreciation or both. Investment property is initially stated at cost, including related transaction costs, and then at fair value
as determined every year by an independent registered valuer.
Any gain or loss arising from a change in the fair value of the investment property is recognised in the consolidated
statement of comprehensive income within net changes in fair value of investment properties. Subsequent expenditure is
capitalised to the asset’s carrying amount only when it is probable that future economic benefits associated with the item
will flow to SPL and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed to
the consolidated statement of comprehensive income during the period in which they are incurred.
Lease incentives are capitalised to the respective investment properties in the consolidated statement of financial position
and amortised on a straight-line basis over the non-cancellable portion of the lease to which they relate.
Investment properties are de-recognised when they have been disposed of. The net gain or loss on disposal of investment
property is calculated as the difference between the carrying amount of the investment property at the time of the disposal
and the net proceeds on the disposal, and is included in the consolidated statement of comprehensive income in the
reporting period in which the disposal occurs.
Investment properties are not depreciated for accounting purposes. However, for tax purposes, depreciation is claimed on
building fit-out and a deferred tax liability is recognised where the building component of the registered valuation exceeds
the tax book value of the building. The deferred tax liability is capped at the amount of depreciation that has been claimed
on each building.
SIML does not hold investment properties, but provides management services over SPL’s investment property portfolio.
Office
$000
Industrial
$000
Retail
$000
Large
Format
Retail
$000
Land/
Development
$000
Total
$000
Balance at 31 Mar 16 209,450 169,325 369,335 466,550 2 ,10 01,216,760
Subsequent capital expenditure 3,980 673 1,442 18 3046 , 417
Net capitalised incentives
(11) (401) (420)––(832)
Spreading of fixed rental income
amortisation
41 (103) 269 (525)–(318)
Disposals––– (11, 3 0 0 )–(11, 3 0 0 )
Net change in fair value 1,490 13,001 474 7, 207 9622,268
Demerger of properties to
Investore
––– (373,950)–(373,950)
Balance at 31 Mar 17
214,950 182,495 371,100 88,000 2,500859,045
Subsequent capital expenditure 4,002 12,478 2,969 13–19,462
Net capitalised incentives (61) (437) (399)––(897)
Spreading of fixed rental income
amortisation
266 (98) 124 (396)–(104)
Transfers from work in progress
– 485–––485
Reclassification– (18,925)–– 18,925–
Lease restructure expenditure––– 18,000–18,000
Disposals (note 1)––– (78,372)–(78,372)
Net change in fair value
4,393 19,702 9,066 15,505 (325)48,341
Balance at 31 Mar 18
223,550 195,700 382,860 42,750 21,100865,960
In the current year, a revaluation movement of $760,201 (2017: $203,658), arising from the elimination of the capital
expenditure fees charged by SIML to SPL, has been reflected in the consolidated statement of comprehensive income.
Capital expenditure consists of fit-outs and other physical enhancements to the investment properties, with ownership
of such capital amounts being retained by SPL.
46
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
47
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 11: INVESTMENT PROPERTIES (CONTINUED)
Valuation basis (continued)
At each reporting date, SIML’s asset managers:
• verify all major inputs to the independent valuation report; and
• assess property valuation movements when compared to the prior year valuation report.
SIML’s executive team review the valuations performed by the independent valuers for financial reporting purposes.
This team reports directly to SIML’s Chief Executive Officer. Discussions of valuation processes and results are held
between members of SIML’s executive team and the independent valuers, and the Chief Executive Officer and Audit
and Risk Committee, at least once every six months, in line with SPL’s reporting dates. Ultimately, SPL’s directors are
responsible for reviewing and approving the investment property valuation.
Breakdown of valuation by valuer
2018
$000
2017
$000
Colliers 268,060145, 570
CBRE 215,900305,750
JLL 218,750320,975
Bayleys 93,25086,750
Colliers Wellington
70,000–
865,960859,045
The following fair value measurement hierarchy levels are applied:
Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(as prices) or indirectly (derived from prices);
Level 3 – inputs for the asset or liability that are not based on observable market data.
Investment property measurements are categorised as Level 3 in the fair value hierarchy. During the year there were no
transfers of investment properties between levels of the fair value hierarchy.
The key inputs used to measure fair value of investment properties, along with their sensitivity to significant increase or
decrease, are stated below:
Fair value measurement
sensitivity to significant
Significant
inputDescription
Increase
in input
Decrease
in input
Valuation
method
Market
capitalisation
rate
The capitalisation rate is applied to the market
income to assess an investment property’s value.
The capitalisation rate is derived from detailed analysis
of factors such as comparable sales evidence and
leasing transactions in the open market, taking into
account location, tenant covenant – lease term and
conditions, weighted average lease term (WALT), size
and quality of the investment property.
DecreaseIncreaseIncome
Capitalisation
Discount rateThe discount rate is applied to future cash flows
of an investment property to provide a net present
value equivalent. The discount rate adopted takes
into account recent comparable market transactions,
prospective rates of return for alternative investments
and apparent risk.
DecreaseIncreaseDiscounted
Cash Flow
Market rentalThe valuer’s assessment of net market rental for both
occupied and vacant areas of the investment property.
IncreaseDecreaseIncome
Capitalisation
and Discounted
Cash Flow
Rental
growth rate
The rental growth rate applied to the market rental in
the 10 year cash flow projection.
IncreaseDecreaseDiscounted
Cash Flow
NOTE 11: INVESTMENT PROPERTIES (CONTINUED)
Valuation basis (continued)
Generally, a change in the assumption made for the adopted capitalisation rate is accompanied by a directionally similar
change in the adopted discount rate. It may also result in an adjustment to the terminal yield. The adopted capitalisation
rate forms part of the income capitalisation approach and the adopted discount rate forms part of the discounted cash
flow approach.
When calculating fair value using the income capitalisation approach, the net market rent has a strong interrelationship
with the adopted capitalisation rate, given the methodology involves assessing the total net market income receivable from
the property and capitalising this in perpetuity to derive a capital value. In theory, an increase in the net market rent and an
increase (softening) in the adopted capitalisation rate could potentially offset the impact to the fair value. A decrease in the
net market rent and a decrease (tightening) in the adopted capitalisation rate could also potentially offset the impact to fair
value. A directionally opposite change in the net market rent and the adopted capitalisation rate could potentially magnify
the impact on the fair value.
When assessing a discounted cash flow, the adopted discount rate and adopted terminal yield have a strong
interrelationship in deriving a fair value, given the discount rate will determine the rate in which the terminal value is
discounted to the present value.
An increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal yield could
potentially offset the impact to the fair value. A decrease (tightening) in the discount rate and an increase (softening) in
the adopted terminal yield could also potentially offset the impact to fair value. A directionally similar change in the adopted
discount rate and the adopted terminal yield could potentially magnify the impact to the fair value.
The following tables detail the ranges used for each key significant input disclosed for the various investment property
classes:
As at 31 Mar 18
Market capitalisation
rate
Discount
rate
Market rental
$/sqm
Rental growth rate
(average 10 years)
Office6.25% to 10.25%7.50% to 9.75%167-4792.05%-2.95%
Industrial4.88% to 6.88%6.25% to 8.50%92-1432.36%-2.78%
Retail6.38% to 7.75%7.50% to 9.44%193-4231.17%-3.00%
Large Format Retail
5 .13% t o 5 .13%6.50% to 6.50%183-1832.30%-2.30%
Total Portfolio
4.88% to 10.25%6.25% to 9.75%92-4791.17%-3.00%
As at 31 Mar 17
Office6.30% to 10.50%7.40% to 10.00%166 - 4742.07%-2.95%
Industrial5.00% to 7.75%6.25% to 9.50%8 8 -1762.56%-2.77%
Retail6.38% to 7.63%7.75% to 9.00%190 - 4201.30%-3.00%
Large Format Retail
5.50% to 9.85%7.50% to 10.47%96 -16 31.23%-2.42%
Total Portfolio
5.00% to 10.50%6.25% to 10.47%88 - 4741.23%-3.00%
48
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
49
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 11: INVESTMENT PROPERTIES (CONTINUED)
The following tables provide a summary of the valuation of the individual investment properties, their market cap rate,
occupancy and WALT for the purposes of providing further detail of the assets which are considered to be the most
relevant to the operations of SPL.
Valuer
2018
$000
Market
cap rate
%
Occupancy
%
WALT
years
Office
33 Corinthian Drive, AucklandBayleys47, 3506.30100.07.5
7 – 9 Fanshawe Street, AucklandColliers9,80010.25100.02.4
80 Greys Avenue, AucklandCBRE19,7007.0 0100.01.6
21 – 25 Teed Street, AucklandColliers21,7007.0 097.92 .1
35 Teed Street, AucklandBayleys21,10 06.25100.05.5
33 Customhouse Quay, WellingtonCBRE33,9006.75100.09.2
1 Grey Street, WellingtonColliers Wellington52,7507.50100.04.4
22 The Terrace, WellingtonColliers Wellington
17, 2507.88100.03.6
Office total223,5507.0799.85 .1
Industrial
30 Airpark Drive, AucklandColliers22,6006.63100.01.7
22 Ha Crescent, AucklandBayleys13,6006 .13100.03.3
8 Reg Savory Place, AucklandCBRE7,70 06.00100.05.4
20 Rockridge Avenue, AucklandCBRE14,7006.63100.02.5
460 Rosebank Road, AucklandColliers16 ,10 06.88100.03.8
25 O’Rorke Road, AucklandColliers64,0005.88100.05.0
415 East Tamaki Road, AucklandColliers17,10 06.38100.03.0
15 Ride Way, AucklandBayleys11, 2 0 05.75100.05.4
34 Airpark Drive, AucklandColliers7, 20 04.88100.09.8
15 Rockridge Avenue, AucklandColliers
21,5005.6339.010.0
Industrial total195,7006 .10 94.64.3
Retail
Cnr Mt Wellington Highway & Penrose Road, AucklandColliers36,3006.7597.12.4
Johnsonville Shopping Centre, Wellington (50%)Colliers30,6607.7590.33.0
61 Silverdale Street, AucklandCBRE98,4006.5098.95.4
65 Chapel Street, TaurangaCBRE41, 50 07.63100.03.0
NorthWest Shopping Centre, AucklandJLL
176,0006.3896.26 .1
Retail total382,8606.6997. 34.9
Large Format Retail
2 Carr Road, Auckland JLL42,7505 .13100.08.9
Land/Development
*11 Springs Road, AucklandColliers
21,10 0–––
Total
865,9606.5796.85.0
* This investment property is being held for development, consequently the market cap rate, occupancy rate and WALT are
not applicable.
The market cap rate %, occupancy % and WALT years for the property class totals and total of investment properties are
weighted averages.
NOTE 11: INVESTMENT PROPERTIES (CONTINUED)
Valuer
2017
$000
Market
cap rate
%
Occupancy
%
WALT
years
Office
33 Corinthian Drive, Auckland Bayleys 46,0506.30 100.08.5
7 – 9 Fanshawe Street, Auckland Colliers 9,50010.50 100.03 .1
80 Greys Avenue, Auckland CBRE 20,0007.13 100.02.6
21 – 25 Teed Street, Auckland Colliers 21,10 06.88 97.92.7
35 Teed Street, Auckland Bayleys 20,0506.50 100.06.3
33 Customhouse Quay, WellingtonCBRE32,7007.25 100.02.7
1 Grey Street, WellingtonCBRE49,7507.75 100.03.8
22 The Terrace, WellingtonCBRE
15,80 08.25 100.02.9
Office total214,9507.26 99.84.3
Industrial
30 Airpark Drive, Auckland Colliers 21,9006.75 100.02.7
22 Ha Crescent, Auckland Bayleys 10,7006.65 100.01.2
8 Reg Savory Place, Auckland CBRE 6,6006.63 100.00.4
20 Rockridge Avenue, Auckland CBRE 14 ,10 06.75 100.03.5
460 Rosebank Road, Auckland Colliers 14, 50 07.50 45.85.6
11 Springs Road, Auckland Colliers 20,0007.75 100.00.5
25 O’Rorke Road, AucklandJLL61,2756.09 100.06.0
415 East Tamaki Road, Auckland Colliers 16,7506.38 100.04.0
15 Ride Way, Auckland Bayleys 9,9506.25 100.00.4
34 Airpark Drive, Auckland Colliers
6,7205.00 100.010.8
Industrial total182,4956.56 94 .13.5
Retail
Cnr Mt Wellington Highway & Penrose Road, AucklandColliers35 ,10 06.75 96.72.8
Johnsonville Shopping Centre, Wellington (50%)JLL 30,5007.05 96 .13.0
61 Silverdale Street, AucklandCBRE90,0006.75 99.16.2
65 Chapel Street, TaurangaCBRE40,5007.63 100.03.5
NorthWest Shopping Centre, AucklandJLL
175,0006.38 99.27.0
Retail total371,10 06.70 98.85.6
Large Format Retail
446 Te Rapa Road, HamiltonCBRE19,30 07.63100.02.2
Cnr Tremaine Avenue & Railway Road, Palmerston NorthJLL14, 80 09.85100.02.2
26 - 48 Old Taupo Road, RotoruaCBRE17,0007.88100.02.2
2 Carr Road, Auckland JLL
36,9005.50100.09.9
Large Format Retail total88,0007.16 100.04.7
Land/Development
*15 Rockridge Avenue, AucklandJLL
2,500–––
Total
859,0456.8697.44.8
* This investment property is being held for development, consequently the market cap rate, occupancy rate and WALT are
not applicable.
The market cap rate %, occupancy % and WALT years for the property class totals and total of investment properties are
weighted averages.
50
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
51
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 12: WORK IN PROGRESS
Work in progress is investment property which is being developed by SPL for rental purposes and is initially stated at cost
and subsequently carried at fair value. Fair value measurement is only applied if it is considered that the fair value can be
reliably measured. In order to evaluate whether the fair value of work in progress can be determined reliably, management
considers:
• the provisions of the construction contract;
• the stage of completion;
• whether the project/property is standard (typical for the market) or non-standard;
• the level of reliability of cash inflows after completion; and
• the development risk specific to the property.
The fair value of investment property reflects, among other things, rental income contracted by leases and assumptions
about rental income from future leases in light of the current market conditions. The fair value also reflects, on a similar
basis, the cash outflows that could be expected in respect of the investment property. However, when work in progress is
at an early stage in a development, fair value cannot be reliably measured and the work in progress is stated at cost less
any impairment.
2018
$000
2017
$000
11 Springs Road, Auckland 1,047–
Johnsonville Shopping Centre, Wellington 865 865
15 Rockridge Avenue, Auckland
– 484
1,912 1,349
Work in progress costs for 11 Springs Road, Auckland, were incurred in relation to a redevelopment project with Waste
Management NZ Limited (Waste Management), with target completion in the second half of the 2019 calendar year.
The development is forecast to cost $43 million, and the agreement with Waste Management allows for the expansion
of the scope of works by up to $23 million with an associated increase in rental. As at balance date, the development
project was subject to Overseas Investment Office (OIO) approval and resource consent. On 4 May 2018, SPL announced
that both the OIO approval and resource consent were received (note 27).
Work in progress costs for Johnsonville Shopping Centre, Wellington, have been incurred in relation to the development of
the shopping centre.
Work in progress costs for 15 Rockridge Avenue, Auckland, were incurred in relation to a new multi tenancy warehouse and
office facility. This development was completed in March 2018 and has now been classified as an investment property.
NOTE 13: INVENTORY – DEVELOPMENT PROPERTY
SPL’s inventory relates to a property that was developed and where there is an option held by another party to buy the
property within the short term. The property is held at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business less costs to complete development and selling expenses.
2018
$000
2017
$000
NorthWest Two, Auckland
36,277 36,247
NorthWest Two, a purpose-built main street retail environment, dining offer and office complex, opened in October
2016 opposite NorthWest Shopping Centre. NorthWest Two adds a greater breadth of entertainment, dining and retail
experiences and comprises four separate buildings with an additional 7,920m
2
of office, dining and retail space.
The NorthWest Two development was undertaken further to a conditional right in SPL’s original agreement to acquire the
NorthWest Shopping Centre land from Westgate Town Centre Limited (WTCL) in 2013. Under that agreement, following the
occurrence of certain events:
• SPL can obtain an initial 35 year ground lease from the landowner, WTCL, at no cost and there is no annual ground rental
payable. SPL obtained a ground lease effective from 19 December 2014.
• WTCL can acquire the development from SPL within three years of the ground lease’s effective date, at a price equal to
115% of SPL’s total development cost, including holding costs.
• If WTCL does not acquire the development within the three year period, SPL can obtain freehold title to the land for $1.
SPL has agreed to defer the expiry date of WTCL’s three year option to acquire SPL’s NorthWest Two development.
The option was due to expire on 19 December 2017 but has been extended pending the outcome of discussions
between SPL and WTCL.
NOTE 14: INTEREST IN ASSOCIATES & JOINT ARRANGEMENT
Interest in associates are accounted for using the equity method and are stated in the consolidated statement of financial
position at cost, adjusted for the movement in SPL’s share of their net assets and liabilities. Under this method, SPL’s
share of profits and losses after tax of associates is included in SPL’s consolidated profit before taxation. Adjustments
to the carrying amount are also made for SPL’s share of changes in the associates’ other comprehensive income.
SPL’s accounting policy is not to take account of the effects of transactions recorded directly in equity outside profit or
loss and other comprehensive income.
Set out below are the associates of SPL as at 31 March, which, in the opinion of the directors, are material to SPL.
EntityOwnership
Ownership interest
Nature of
relationship
Measurement
method
Carrying
amount
2018
$000
Carrying
amount
2017
$00020182017
InvestoreShares19.9%19.9%AssociateEquity86,01281,232
Diversified TrustUnits2.0%2.0%AssociateEquity
3,9664 ,10 6
Total
89,97885,338
Investore Property Limited (Investore)
SPL holds 19.9% of the shares in Investore. Given the extent of SPL’s equity investment, the appointment of SIML
as manager of Investore, and that two of SIML’s current directors are also directors of Investore, the SPL Board has
concluded that SPL retains “significant influence” over Investore. As such, SPL’s investment in Investore has been treated
as an investment in an associate.
52
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
53
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 14: INTEREST IN ASSOCIATES & JOINT ARRANGEMENT (CONTINUED)
Diversified NZ Property Trust (Diversified Trust)
SPL holds approximately 2% of Diversified Trust. Given the appointment of SIML as manager of Diversified Trust, and that
one of SIML’s current directors is also on Diversified Trust’s Investment Committee, the SPL Board has concluded that SPL
retains “significant influence” over Diversified Trust. As such, SPL’s investment in Diversified Trust has been treated as an
investment in an associate. As at 31 March 2018, SPL has an interest-bearing loan receivable of $3.4 million (2017: $3.4
million) with Diversified Trust.
Johnsonville Shopping Centre
SPL holds a 50% interest in a joint arrangement with Diversified Trust relating to the investment property at Johnsonville
Shopping Centre, Wellington. SIML is the manager of the joint arrangement.
The agreement between SPL and Equity Trustees Limited (in its capacity as trustee of the Diversified Trust) in relation to
their co-ownership of Johnsonville Shopping Centre requires unanimous consent from all parties for all relevant activities.
The two parties have direct rights to the asset and are jointly and severally liable for the liabilities incurred in relation to the
co-owned asset. This arrangement is therefore classified as a joint operation and SPL recognises its direct right to
the jointly held assets, liabilities, revenues and expenses as described below.
Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint
ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal
structure of the joint arrangement. SPL has a joint operation and it recognises its direct right to the assets, liabilities,
revenues and expenses of the joint operation and its share of any jointly held or incurred assets, liabilities, revenues and
expenses. These have been incorporated in the financial statements, with SPL’s 50% share of assets, liabilities, revenue
and expenses below:
2018
$000
2017
$000
Assets
Current assets 19944
Non-current assets
865865
1,064909
Liabilities
Current liabilities 259283
Non-current liabilities
––
259283
Net assets
805626
Share of rental income 2,7692,795
Share of expenses
(667)(453)
Net share of profit
2 ,10 22,342
Summarised financial information for associates
The following tables provide summarised financial information for the associates of SPL. The information disclosed reflects
the amounts presented in the financial statements of the relevant associates, not SPL’s share of those amounts. They have
been amended to reflect adjustments made by the entity when using the equity method, including fair value adjustments
and modifications for differences in accounting policy.
NOTE 14: INTEREST IN ASSOCIATES & JOINT ARRANGEMENT (CONTINUED)
Summarised statement of comprehensive income
InvestoreDiversified Trust
2018
$000
2017
$000
2018
$000
2017
$000
Net rental income 44,546 35,014 38,232 20,553
Finance income 138 93 85 340
Finance expenses (including swap break cost) (12,067) (13, 396) (16,252) (10,793)
Other income/(expenses)20,2369,065(6,845)2,844
Income tax expense
(6,683) (2,260) (2,780) (2 ,129)
Profit for the period
4 6 ,17 0 28 , 516 12,440 10,815
Other comprehensive income
( 2 ,141) 4,058 (2,355) 1,412
Total comprehensive income
44,029 32 , 574 10,085 12, 227
Summarised statement of financial position
Current assets
Cash and cash equivalents 2 ,19 9 4,377 5 ,10 8 1,015
Other current assets
1,413 896 5,787 36,378
3,612 5,273 10,895 37,393
Non-current assets
Investment properties 738,330 660,430 537, 56 0 523,050
Other non-current assets
964 3 , 341 1,544 2,858
739,294 663,771 539,104 525,908
Current liabilities
Financial liabilities (excluding trade payables)(1,262) (1,416) (46,393) (1,072)
Other current liabilities
(4,808) (2,359) (10,894) (11, 9 4 8 )
(6,070) (3,775) (57, 287 ) (13,020)
Non-current liabilities
Financial liabilities (excluding trade payables) (307,7 78) (26 0, 241) (294,394) (344,396)
Other non-current liabilities
––– (600)
(307,7 78) (26 0, 241) (294,394) (344,996)
Net assets 429,058 405,028 198,318 205,285
Reconciliation to carrying amounts
Opening net assets 405,028 24 205,285–
Profit for the period 4 6 ,17 0 28 , 516 12,440 10,815
Other comprehensive income ( 2 ,141) 4,058 (2,355) 1,412
Issue of shares/units net of capital raising expenses
–
382,247– 198,713
Dividends paid
(19,999) ( 9, 817 ) (17,052) (5,655)
Closing net assets 429,058 405,028 198,318 205,285
Group’s share in % 19.9% 19.9% 2% 2%
Share at carrying percentages 85,383 80,601 3,966 4 ,10 6
Opening net assets 81,232– 4 ,10 6–
Acquisition of investment
–
76,799
–
3, 974
Movement in cash flow hedges net of tax (427) 1,006 (47) 29
Profit after tax for the period since acquisition 9,18 7 5 ,141 249 216
Dividend received
(3,980) (1,714) (342) (113 )
Closing carrying amount
86,012 81,232 3,966 4 ,10 6
Fair value of associates with a quoted market price
72,929 69,282––
54
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
55
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 15: TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised and carried initially at their fair value plus directly attributable costs, and
subsequently measured at amortised cost less impairment losses. An impairment provision is made when there is objective
evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that Stride will not be able to
collect all of the amounts due under the original terms of the invoice.
2018
$000
2017
$000
Current
Trade and other receivables 2,3201,735
Less impairment provision (438)(221)
Related party receivable (note 22)
4340
1,8861,854
Carrying amount
1,8861,854
Less than 30 days overdue
1,5401,416
Over 30 days overdue 346438
Movement in impairment provision
Opening balance (221)(154)
Reduction in impairment provision 189128
Additional impairment provision
(406)(195)
Closing balance
(438)(221)
Bad and impaired debts in the statement of comprehensive income
– Bad debts written off
170305
– Movement in impairment provision
21767
387372
NOTE 16: TRADE AND OTHER PAYABLES
Trade and other payables represent unsecured liabilities for goods and services provided to Stride prior to the end of the
financial year which are unpaid. Trade and other payables are usually paid within 30 days of recognition. The carrying
amounts of trade and other payables are assumed to be the same as their fair values due to their short term nature.
2018
$000
2017
$000
Current
Unsecured liabilities
Trade payables 2,967 3,604
Related party payable (note 22)218–
Development and capital expenditure accruals 2 , 911 5,738
Retention accruals 1,423 1,185
Other accruals and payables
6,931 5,093
14,450 15,620
Other accruals and payables include GST, tenant deposits, employee short term incentive and holiday pay accruals,
and other operating expense accruals.
NOTE 17: INCOME TAX
SPL is a listed Portfolio Investment Entity (PIE) for the purposes of the Income Tax Act 2007 and is required to pay tax to
the Inland Revenue as required by the Income Tax Act 2007.
Income tax expense comprises current and deferred tax and is recognised in the consolidated statement of comprehensive
income for the year.
Current and deferred tax is calculated on the basis of the laws enacted or substantively enacted at the reporting date.
Deferred tax is provided, using the liability method, on all temporary differences between the tax base of assets and
liabilities and their carrying amounts for financial reporting purposes. Temporary differences include:
• The tax liability arising from accumulated depreciation claimed on investment properties, where applicable; and
• The tax asset/liability arising from the unrealised gains/losses on the revaluation of interest rate swaps.
For deferred tax liabilities or assets arising on investment property measured at fair value, it is assumed that the carrying
amounts of the investment property will be recovered through sale. Investment properties are independently valued each
year (note 11) and the valuation includes a split between the land and building components. Deferred tax is provided on
the depreciation claimed to date on the building component of the investment properties and this places reliance on the
valuation split provided by the valuers.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.
56
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
57
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 17: INCOME TAX (CONTINUED)
The income tax expense is represented by
2018
$000
2017
$000
Current tax(6,276)(9,963)
Deferred tax
7352,092
Income tax expense per the consolidated statement of comprehensive
income
(5,541)( 7, 871)
Profit before income tax from continuing operations100,79562 ,074
Prima facie income tax using the company tax rate of 28% (28,223)(17,381)
Decrease/(increase) in income tax due to:
Net change in fair value of investment properties13,2136,235
Non-taxable income3,3741,391
Assessable income(186)(25)
Depreciation2,8182,995
Depreciation recovered on disposal of investment properties(1,797)(2,828)
Non-deductible expenses(462)(1,334)
Deductible lease surrender payment5,040–
Expenditure deductible for tax108248
(Under)/over-provision in prior year(13)465
Temporary differences
(148)271
Current tax expense(6,276)(9,963)
Depreciation6682,224
Other
67(132)
Deferred tax charged to profit or loss7352,092
Income tax expense per the consolidated statement of
comprehensive income
(5,541)( 7, 871)
Imputation credits available for use in subsequent reporting periods
2,2322,306
Imputation credits available for use in subsequent reporting periods are based on a rate of 28% (2017: 28%) and
represent the balance of the imputation account as at the end of the reporting period, adjusted for imputation credits
arising from provisional income tax paid.
NOTE 17: INCOME TAX (CONTINUED)
Gross movement in net deferred tax liability
2018
$000
2017
$000
Opening balance(14 ,17 3) (14, 236)
Credited to profit or loss735 2,092
Credited/(charged) to other comprehensive income
11 (2,029)
Closing balance
(13,427) (14 ,173)
2017
$000
Recognised
in profit
or loss
$000
Recognised
in other
comprehensive
income
$000
2018
$000
Deferred tax assets
Derivative financial instruments 2,204– 112,215
Other temporary differences
200291–491
2,404291 112,706
Deferred tax liabilities
Depreciation on investment properties(16,484)668–(15,816)
Reinstatement receipts (93)
(172)
–(265)
Other
–(52)–(52)
(16,577 )444–(16 ,13 3)
(14,173)
735
11(13,427)
2016
$000
Recognised
in profit
or loss
$000
Recognised
in other
comprehensive
income
$000
2017
$000
Deferred tax assets
Derivative financial instruments 4,233– (2,029) 2,204
Other temporary differences
373 (173)– 200
4,606 (173) (2,029) 2,404
Deferred tax liabilities
Depreciation on investment properties (18,708) 2,224– (16,484)
Reinstatement receipts (117) 24– (93)
Other
(17 ) 17––
(18,842) 2,265–(16,577)
(14, 236)
2,092(2,029)(14,173)
58
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
59
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 18: DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate derivatives (derivative financial instruments) are initially recognised at fair value on the date a derivative contract
is entered into and are subsequently measured at their fair value at each reporting date. Fair value of over-the-counter
derivatives, such as interest rate swaps, is determined using valuation techniques which maximise the use of observable
data and rely as little as possible on entity specific estimates.
SPL has classified its interest rate derivatives as Level 2 as at 31 March 2018 (2017: Level 2) as all significant inputs
required to fair value are observable. There have been no transfers between Level 1 and 2 during the respective periods.
SIML does not hold any interest rate derivatives (2017: nil).
Interest rate derivative fair values are independently valued and are calculated using a discounted cash flow model using
forward interest rates extracted from observable yield curves. Discount rates include an adjustment for counterparty credit
risk. The effect of discounting is generally insignificant for Level 2 derivatives.
Outstanding interest rate derivative contracts:
2018
$000
2017
$000
Active interest rate derivative contracts 255,000260,000
Forward dated interest rate derivative contracts
–80,000
Total notional principal amounts
255,000340,000
SPL designates its interest rate derivatives as hedges of the interest flows on its borrowings. These are cash flow hedges.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately
in the consolidated statement of comprehensive income within finance expenses.
At balance date, the fixed interest rates ranged from 2.92% to 4.57% (2017: 2.92% to 4.95%), the weighted average
interest rate (excluding forward starts) was 3.84% (2017: 3.96%), and the main floating rate was BKBM.
As at 31 March 2018, the fair value of the interest rate derivatives was a liability of $8,210,396, including an accrued
interest liability of $299,746 (2017: liability of $8,172,399 including an accrued interest liability of $300,488).
The fair values of interest rate derivatives are determined from valuations prepared by independent treasury advisors
using valuation techniques. These are based on the present value of estimated future cash flows based on the terms
and maturities of each contract and the current market interest rates at balance date. Fair values also reflect the current
creditworthiness of the derivative counterparties. The valuations were based on market rates at 31 March 2018 of between
1.96%, for the 90-day BKBM, and 3.06%, for the 10-year swap rate (2017: 2.00% and 3.45%, respectively).
At balance date, if the floating interest rates on hedged bank borrowings had been 1% higher, with other variables
remaining constant, equity would have been $5,720,814 (2017: $7,776,566) higher for the year. If the floating interest rates
on the hedged bank borrowings had been 1% lower, with other variables remaining constant, equity would have been
$6,573,282 (2017: $8,783,109) lower for the year. This represents the change in fair value of the interest rate derivatives.
There would have been no impact on profit in either year as the change in fair value is taken to the cash flow hedge
reserve. The interest rate sensitivity analysis is performed by using an instantaneous parallel shift in the par yield curve at
the testing date.
SPL and SIML do not hold derivative financial instruments for trading purposes.
Gains and losses recognised in the cash flow hedge reserve in equity (note 20) on interest rate derivative contracts as at
31 March 2018 will be reclassified in the same period in which the hedged forecast cash flows affect profit or loss until the
repayment of the bank borrowings.
NOTE 19: BANK BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised
in the statement of consolidated comprehensive income over the period of the borrowings using the effective interest
method. Borrowings are classified as current liabilities unless SPL has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date.
SIML does not have any bank borrowings (2017: nil).
2018
$000
2017
$000
Non-current
Facility drawn down 307,70 0347, 50 0
Borrowing costs
(335)(479)
Total borrowings
307, 365347,021
Facility drawn down 307,70 0347, 50 0
Undrawn facility available
92,30052,500
Total facility available
400,000400,000
Weighted average interest rate for drawn debt (inclusive of current interest
rate derivatives, margins and line fees) at balance date 5.04%4.85%
The bank facility consists of Facility A for $200 million expiring 9 June 2019 and Facility B for $200 million expiring 9 June
2021. SPL’s secured borrowings are via syndicated senior secured facilities with ANZ Bank New Zealand Limited, Bank of
New Zealand, Commonwealth Bank of Australia and Westpac New Zealand Limited. The bank security on the facilities is
managed through a security agent who holds a first registered mortgage on all the investment properties owned by SPL
and a registered first ranking security interest under a General Security Deed over substantially all the assets of SPL.
The interest rate on the facility was 3.20% as at balance date (2017: 3.90%).
SPL has been compliant with bank covenants during the year ended 31 March 2018.
SIML has a $3 million overdraft facility with ANZ Bank of New Zealand Limited, which has not been utilised during
the relevant periods.
60
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
61
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 20: EQUITY
Share Capital
Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Each of
SPL and SIML has 364,989,277 shares authorised as at 31 March 2018 (2017: 364,856,209).
$000
Opening balance 1 Apr 16633,449
Demerger of shares in Investore Property Limited(134 ,155 )
Share issue expenses(2)
Vesting of employee long term incentive plan
682
Closing balance 31 Mar 17
499,974
Vesting of employee long term incentive plan
231
Closing balance 31 Mar 18
500,205
SPL Share Capital500,205
SIML Share Capital
–
500,205
Number of shares on issue000
Opening balance 1 Apr 16364,359
Shares issued under the long term incentive plan
497
Closing balance 31 Mar 17
364,856
Shares issued under the long term incentive plan
133
Closing balance 31 Mar 18
364,989
SPL and SIML shares are “stapled” and jointly listed on the NZX (Stapled Securities). There is 100% commonality of
shareholding in both entities. Stapling of shares is a contractual and constitutional arrangement between the two Stapled
Entities whereby each Stapled Entity’s equity securities are combined with (or stapled to) the equity securities issued by
the other Stapled Entity. The Stapled Entities have the same shareholders, and their shares cannot be traded or transferred
independently of one another. The Stapled Securities (comprised of a SPL share stapled to a SIML share) are traded as a
single economic unit with a single quoted price.
The SPL Board and the SIML Board are constitutionally required to be comprised of the same directors. Shareholders
can appoint up to eight directors to the SIML Board. SPL’s constitution was amended on 11 July 2016 to provide that any
director who is appointed to (or removed from) the SIML Board is automatically appointed to (or removed from) the SPL
Board. SIML shareholders vote on the appointment of the SIML directors in the usual way (i.e. by ordinary resolution) and
the SIML Board may appoint directors to fill any casual or other vacancy on the SIML Board. Shareholders will not have the
right to appoint or remove SPL directors directly but will in effect do so by voting as SIML shareholders on the appointment
or removal of SIML directors.
There is only one class of shares, being ordinary shares, and they rank equally with each other. All issued shares are fully
paid and have no par value.
The Dividend Reinvestment Plan (DRP) was suspended and has remained suspended since the fourth quarter dividend for
the 2014 financial year.
On 23 May 2016, SPL issued 97,298 ordinary shares under SPL’s long term share incentive scheme four.
On 9 June 2016, SIML subdivided the number of SIML shares on issue so that there are the same number of SIML shares
on issue as the number of Stride shares on issue.
On 31 March 2017, SPL and SIML issued 400,000 ordinary shares in each of them (i.e. 400,000 Stapled Securities) to
Peter Alexander (former Chief Executive Officer).
On 26 May 2017, SPL and SIML issued 133,068 ordinary shares in each of them (i.e. 133,068 Stapled Securities) under the
long term share incentive FY15 scheme.
NOTE 20: EQUITY (CONTINUED)
Basic and diluted earnings per share
Basic and diluted earnings per share amounts are calculated by dividing profit after income tax attributable to shareholders
by the weighted average number of shares on issue (note 8).
2018
$000
2017
$000
Profit after income tax attributable to shareholders –
continuing operations 95,25454,203
Weighted average number of shares for purpose of basic earnings
per share (000) 364,969 364,443
Basic earnings per share – SPL 24.39 13. 87
Basic earnings per share – SIML
1.71 1.00
Basic earnings per share – weighted (cents)
2 6 .10 14. 87
Weighted average number of shares for purpose of diluted earnings
per share (000)365,537365,021
Diluted earnings per share – SPL 24.35 13. 85
Diluted earnings per share – SIML
1.71 1.00
Diluted earnings per share – weighted (cents)
26.06 14. 85
Profit after income tax attributable to shareholders – continuing and
discontinued operations 95,254 53,334
Weighted average number of shares for purpose of basic earnings
per share (000)364,969 364,443
Basic earnings per share – SPL 24.39 13.63
Basic earnings per share – SIML
1.71 1.00
Basic earnings per share – weighted (cents)
2 6 .10 14.63
Weighted average number of shares for purpose of diluted earnings
per share (000) 365,537 365,021
Diluted earnings per share – SPL 24.35 13.61
Diluted earnings per share – SIML
1.71 1.00
Diluted earnings per share – weighted (cents)
26.06 14.61
Reserves
Reserves consist of the following Stride reserves
Cash flow hedge reserve (5,698) (5,670)
Options reserve 644 349
Associate reserve – cash flow hedge
559 1,033
Closing balance
(4,495) (4,288)
Cash flow hedge reserve – SPL
Opening balance (5,670) (10,886)
Movement in fair value of interest rate derivatives (39) 7, 24 4
Tax on fair value movement
11 (2,028)
Closing balance
(5,698) (5,670)
Options reserve – SPL and SIML
Opening balance 349 513
Share based payment expense 526 518
Transfer to share capital on vesting of employee long term incentive plan
(231) (682)
Closing balance
644 349
Option reserve — SPL
203349
Option reserve — SIML441–
Associate reserve – cash flow hedge – SPL
Opening balance 1,033–
Changes in reserves of associate
(474) 1,033
Closing balance
559 1,033
62
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
63
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 21: FINANCIAL INSTRUMENTS & RISK MANAGEMENT
A financial instrument is recognised if Stride becomes a party to the contractual provisions of the instrument. Financial
assets are de-recognised if Stride’s contractual rights to the cash flows expire, or if Stride transfers them without retaining
control or substantially all risks and rewards of the asset. Financial liabilities are de-recognised if Stride’s obligations
specified in the contract are extinguished.
Financial assets
Stride classifies its assets as financial assets at fair value through profit or loss and loans and receivables.
The classification depends on the purpose for which the financial assets were acquired. Management determines
the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are included in current assets, except for those with maturities greater than 12 months after balance
date, which are classified as non-current assets.
Loans and receivables are initially recognised at fair value plus transaction costs and are thereafter carried at amortised
cost using the effective interest method. Stride assesses at each balance date whether there is objective evidence (such
as significant financial difficulty of the obligor, breach of contract, or it becomes probable that the debtor will enter
bankruptcy) that a financial asset or a group of financial assets is impaired. The amount of the loss is recognised in the
consolidated statement of comprehensive income.
Financial liabilities
Amortised cost
Liabilities in this category are measured at amortised cost and include borrowings and trade and other payables.
Summary of financial instruments
2018
$000
2017
$000
Non-derivative financial assets
Classified as loans and receivables
Cash and cash equivalents 10,006 5,961
Trade and other receivables 1,886 1,854
NZX bond
75 75
Total non-derivative financial assets at amortised cost
11,967 7, 890
Loan to associate
3,3973,397
Total non-derivative financial assets at fair value through profit or loss
3,397 3,397
Non-derivative financial liabilities
Trade and other payables 14,450 15,620
Bank borrowings
307, 365 347,021
Total non-derivative financial liabilities at amortised cost
321,815 362 ,6 41
Interest rate derivative liabilities at fair value
8 , 211 8 ,171
Total derivative financial instruments used for hedging
8 , 211 8 ,171
Financial risk management
Stride’s activities expose it to a variety of financial risks: interest rate risk, credit risk and liquidity risk. Risk management is
the responsibility of the Boards. The Boards identify and evaluate financial risks in close co-operation with management.
The Boards provide written principles for overall risk management, as well as written policies covering specific areas,
such as interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investing excess liquidity.
NOTE 21: FINANCIAL INSTRUMENTS & RISK MANAGEMENT (CONTINUED)
Interest rate risk
As Stride has no significant interest bearing assets, its income and operating cash flows are substantially independent of
changes in market interest rates.
SPL’s interest rate risk arises from bank borrowings (note 19). Borrowings issued at variable rates expose SPL to cash flow
interest rate risk. Borrowings issued at fixed rates expose SPL to fair value interest rate risk. The long term interest rate
policy provides bands that are applied on a rolling basis, which provide for both a high level of fixed interest rate cover over
the near term, as well as a lengthy period of known fixed interest rate cover for a portion of term debt.
SPL manages its cash flow interest rate risk by using floating to fixed interest rate derivatives. Such interest rate derivatives
have the economic effect of converting borrowings from floating to fixed rates. Under the interest rate derivatives, SPL
agrees with other parties to exchange, at quarterly intervals, the difference between floating contract rates and fixed rate
interest amounts calculated by reference to the agreed notional principal amounts. As SPL holds interest rate derivatives,
there is a risk that their economic value will fluctuate because of changes in market interest rates. The value of interest rate
derivatives is disclosed in note 18 and it is acknowledged that there will be fluctuations in their economic value as a result
of changes in market interest rates. SPL’s exposure to interest rate fluctuations is limited to the extent of all the non-hedged
portions of bank borrowings. At balance date, $52,700,000 of drawn bank debt was not hedged (2017: $87,500,000). If
floating interest rates were 1% higher or 1% lower, with other variables remaining constant, the 12 month finance expense
would be higher or lower by $527,000 respectively (2017: $875,000).
SPL’s exposure to variable interest rate risk and the effective weighted average interest rate for interest bearing financial
assets and liabilities is as follows:
2018
$000
2017
$000
Financial assets
Cash and cash equivalents 10,006 5,961
NZX bond 75 75
Loan to associate 3,397 3,397
Financial liabilities
Bank borrowings 307, 365 347,021
The interest rate applicable at balance date for cash and cash equivalent balances was 0.75% (2017: 0.75%), for the NZX
bond was 2.71% (2017: 2.50%), for loan to associate was 5.98% (2017: 6.23%) and for bank borrowings was 3.20%
(2017: 3.90%). SPL’s exposure to interest rates is hedged through the use of interest rate derivatives. The weighted average
interest rate for drawn debt (inclusive of current interest rate derivatives, margins and line fees) of the bank borrowings at
balance date was 5.04% (2017: 4.85%).
Trade and other receivables and payables are interest free and have settlement dates within one year. All other assets and
liabilities are non-interest bearing.
Credit risk
In the normal course of business, Stride incurs credit risk from trade receivables, loan to associate and transactions with
financial institutions.
The risk associated with trade receivables is managed with a credit policy which includes performing credit evaluations on
all customers requiring credit, and ensures that only those customers with appropriate credit histories are provided with
credit. In addition, receivable balances are monitored on an ongoing basis, with the result that Stride’s exposure to bad
debts is not significant. As SPL has a wide spread of tenants over many industry sectors, it is not exposed to any significant
concentration of credit risk. Amounts which are past due are not considered impaired as the majority are due from tenants
that have demonstrated a good past payment history. The risk from financial institutions is managed by placing cash and
deposits with high credit quality financial institutions only. Stride has placed its cash and deposits with ANZ Bank New
Zealand Limited and Westpac New Zealand Limited, both AA- rated by Standard & Poor’s (2017: ANZ Bank New Zealand
Limited, AA- rated by Standard & Poor’s).
Stride is not exposed to any other concentrations of credit risk apart from the loan to associate.
64
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 21: FINANCIAL INSTRUMENTS & RISK MANAGEMENT (CONTINUED)
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate
amount of committed credit facilities, and the ability to close out market positions. Stride’s liquidity position is monitored on
a regular basis and is reviewed monthly by the Boards to ensure compliance with internal policies and banking covenants
as per SPL’s syndicated lending facility.
SPL generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and
has the bank facility available to cover potential shortfalls. Further detail about the undrawn bank facility available is given in
note 19.
The following table outlines SPL’s liquidity profile based on contractual non-discounted cash flows.
Total
$000
0-6 mths
$000
6-12 mths
$000
1-2 yrs
$000
2-5 yrs
$000
>5 yrs
$000
31 Mar 18
Trade and other payables14,45014,450––––
Secured bank borrowings328,4175,2695,269205,318112,561–
Derivative financial instruments
11,7142,2202,0023,2044,288–
354,58121,9397,271208,522116,849–
31 Mar 17
Trade and other payables15,62015,620––––
Secured bank borrowings383,9055,8875,88711,773360,358–
Derivative financial instruments
15,8162,3222,1754,1176,792410
415,34123,8298,06215,890367,150410
Capital risk management
Stride’s capital structure includes debt and equity, comprising shares, reserves and retained earnings as shown in the
consolidated statement of financial position. Stride’s objectives when managing capital are to safeguard Stride’s ability to
continue as a going concern in order to provide returns for shareholders, and to maintain an optimal capital structure to
reduce the cost of capital. In order to maintain or adjust the capital structure, Stride may adjust the amount of dividends
paid to shareholders, return capital to shareholders, buy back shares, issue new shares or sell assets to reduce debt.
As part of its capital risk management, SPL is required to comply with covenants imposed under its banking facility. The
Board regularly monitors these covenants and provides six monthly compliance certificates to the banks as part of this
process. SPL has complied with these covenants during the current and previous years.
SPL’s debt facilities are subject to the following key covenants:
• The bank loan to value ratio will not exceed 50%;
• The ratio of earnings before interest and tax to total interest and financing costs must be greater than 1.75 times; and
• The WALT is at all times greater than 3 years.
Fair values
The carrying value of the following financial assets and liabilities approximate their fair value: cash and cash equivalents,
trade and other receivables, other current assets, trade and other payables and bank borrowings.
NOTE 22: RELATED PARTY DISCLOSURES
The following transactions with a related party took place
2018
$000
2017
$000
Diversified Trust
Distribution income 342 113
Manager's fee income 3,380 2,002
Accounting fee income 175 107
Licencing fee income 90 56
Leasing fee income 931 387
Financing fees for establishing loan facilities–135
Building management fee income 1,952 1,269
Project management fee income 971 346
Services in relation to the Kaikoura earthquake at Queensgate
Shopping Centre 126 355
Interest income 205 132
Rent paid (135) (8)
Investore
Dividend income 3,980 1,714
Manager’s fee income 3,674 2,386
Building management fee income 392 267
Accounting fee income 250 180
Leasing fee income 32 137
Maintenance fee income 27 10
Project management fee income 148 131
Disposal fee income 161–
Bond fee income 175–
The following balances were receivable from a related party
Investore Property Limited 4 37
Diversified NZ Property Trust– 303
The following balance was payable to a related party
Diversified NZ Property Trust 218–
On 28 February 2018, SPL disposed of three Bunnings operated properties to Investore, at Hamilton, Rotorua and
Palmerston North, for $78.5 million. In the prior financial year, SPL disposed of six large format retail properties to
Investore, for a total consideration of $86.95 million, between April and June 2016.
SIML received management fees for managing Diversified Trust, Investore and SPL. The management fee income includes
fees for asset management, accounting services, licencing, development, capital expenditure, maintenance, divestment,
refinancing and any other service where SIML acts on behalf and for Diversified Trust, Investore and SPL in accordance
with the management agreements. The fees are stated or calculated based on the management agreement, and are
recognised in the accounting period in which the services are rendered. The management fees paid from SPL to SIML
eliminate and accordingly do not appear in the consolidated statement of comprehensive income for Stride.
In the current year Tim Storey, John Harvey, David van Schaardenburg and Michael Stiassny received dividends of $57,515
(2017: $60,023) in total.
2018
$000
2017
$000
Directors’ fees 424 340
Chairman's fees
289 14 0
713480
No other benefits have been provided by the group to a director for services as a director or in any other capacity.
66
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 23: REMUNERATION
Key management personnel costs
2018
$000
2017
$000
Salary and other short term benefits – current employees 2 ,10 3 1,592
Salary and other short term benefits – former employees – 1,290
Share based payment expense
526 518
2,629 3,400
Key management personnel includes the Chief Executive Officer and the members of the executive team. Two key
management personnel were employed during the year; the General Manager of Development, Mark Luker on 16 October
2017 and the General Manager of Corporate Services, Louise Hill, on 13 November 2017.
In the current year key management personnel received dividends of $67,342 (2017: $60,763) in total.
Long term incentive plan
Stride operates a long term incentive plan for the SIML executive team that is intended to align the interests of key
employees with the interests of shareholders and provide a continuing incentive to key employees over the long term
horizon. SIML receives services from the employees in exchange for the employees receiving share based payments
only if specified hurdles, relating to the performance of the group, are achieved.
The share performance rights are measured at fair value at grant date, which is in reference to the fair value of the
instruments granted rather than the fair value of the services from the employees. The fair value is determined using
the share price at grant date adjusted for expected dividends and probability of meeting the performance hurdles.
The plan provides for the selected employees to be granted rights to be issued shares for nil consideration if certain
performance hurdles are met. Stride has a number of schemes in place. The table below summaries the types of schemes
and movement of the share performance rights during the year:
Schemes for performance rights issued (000s)
F Y15F Y16
F Y18
(bonus rights)
F Y18
(2 year)
F Y18
(3 year)
2018
Total
2017
Total
Opening balance113145–––258662
Rights granted2025137183257622–
Rights exercised(133)––––(133)(378)
Rights forfeited
––––––(26)
Closing balance
–170137183257747258
The FY18 (bonus rights) scheme was granted without further performance hurdles to recognise the additional contribution
by the Chief Financial Officer and GM Investment Manager to Stride in fulfilling the joint Chief Executive Officer role on
an interim basis pending the appointment of the new Chief Executive Officer. All other plans provide granted rights to be
converted into shares for nil consideration if certain performance hurdles are met. Rights under FY15 and FY16 Schemes
were/are subject to the performance conditions that Total Shareholder Returns (TSR) and Distributable Profit Per Share
(DPPS) are met before a right will vest. The rights under FY15 Scheme were vested on 26 May 2017 and this scheme is
now at an end. Rights under FY18 Scheme are subject to the performance conditions that TSR (relative and absolute) and
Distributions per Security are met before a right will vest.
The key features of the plan are as follows:
• the rights are granted for nil consideration and have a nil exercise price;
• rights do not carry any dividend or voting rights prior to vesting;
• each right that vests entitles the employee to receive one fully paid ordinary share in SPL and SIML. The shares issued on
vesting carry full voting and dividend rights;
• the individual must remain an employee of SIML as at the relevant vesting date for any rights to vest.
NOTE 23: REMUNERATION (CONTINUED)
The participating employees will be liable for the income tax cost of the award of shares and may choose to sell some or all
shares to fund this cost upon issue of the shares. The participants receive one share for every performance right that vests
on a tranche date for nil consideration.
Further share performance rights under the long term incentive plan may be issued on an annual basis. However, the terms
of the plan, eligible participants, and offers of further share performance rights may be modified by the Board from time to
time, subject to the requirements of the NZX Main Board Listing Rules and applicable laws.
NOTE 24: INVESTMENT IN SUBSIDIARY
A subsidiary is an entity controlled by the Parent. The Parent controls an entity when the Parent has power over the
investee, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity.
The financial statements of the subsidiary are included in the financial statements of Stride from the date that control
commences until the date that control ceases. The subsidiary applies the same accounting policies as the group.
The acquisition method of accounting has been used to consolidate the subsidiary of the Parent. All inter-group
transactions and balances between group companies have been eliminated on consolidation.
Subsidiary of Stride Property Limited
Stride Holdings Limited Incorporated in New Zealand
Stride Holdings Limited is 100% owned, has a 31 March balance date, is principally involved in the ownership of
investment properties and is also involved in the development of investment property.
NOTE 25: OPERATING LEASE COMMITMENTS
Payments, including prepayments made under operating leases (net of any incentives received from the lessor), are
charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.
SPL is committed under four (2017: four) operating leases where SPL is the lessee. There is one at 7 – 9 Fanshawe
Street, Auckland, one at 33 Customhouse Quay, Wellington, one at NorthWest Shopping Centre, Auckland and one at
NorthWest Two, Auckland.
The commitments below only reflect the amounts payable under current signed lease contracts up until the next rent
review, at which time the terms of the leases will be renegotiated. The lease at NorthWest Shopping Centre, Auckland,
expires in May 2113. The rent is subject to review as at 1 April 2018 and is currently under negotiation. For the purposes
of this note the operating lease commitment has been recorded at the median between the new rents
proposed by the Lessee and Lessor.
2018
$000
2017
$000
Payable
– no later than 1 year 1,876 1,10 6
– later than 1 year and no later than 5 years 7, 505 3,423
– later than 5 years
6,213 7,0 68
15,594 11, 5 9 7
Stride has no other operating lease commitments (2017: nil).
NOTE 26: CONTINGENT LIABILITIES
Stride has no contingent liabilities at balance date (2017: nil).
68
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
NOTE 27: SUBSEQUENT EVENTS
Between 24 and 30 April 2018, SPL broke interest rate swaps with a notional value of $100 million for a cost of
$4,002,966 and entered into new interest rate derivative contracts with a notional value of $120 million commencing on
30 April 2018 with an average tenor of 5.2 years and an average rate of 2.8%.
On 4 May 2018, SPL announced that the redevelopment project with Waste Management NZ Limited (Waste Management)
at 11 Springs Road, Auckland, is now unconditional, with both resource consent and Overseas Investment Office approval
having been received. The development is forecast to cost $43 million, and the agreement with Waste Management allows
for the expansion of the scope of works by up to $23 million with an associated increase in rental.
Subsequent to balance date, SPL has committed to a further $270,120 (2017: $963,725) in total for various capital
expenditure works to be undertaken on a number of investment properties in the next financial year.
On 25 May 2018, the Boards of SPL and SIML resolved to issue 307,522 ordinary shares in each of them (i.e. 307,522
Stapled Securities) under the long term share incentive scheme.
On 30 May 2018, SPL declared a cash dividend for the period 1 January 2018 to 31 March 2018 of 2.00 cents per share, to
be paid on 21 June 2018 to all shareholders on SPL’s register at the close of business on 14 June 2018. At 2.00 cents per
share, the total dividend payment will be $4,517,946. This dividend will carry imputation credits of 0.2968 cents per share.
This dividend has not been recognised in the consolidated financial statements.
On 30 May 2018, SIML declared a cash dividend for the period 1 January 2018 to 31 March 2018 of 0.47 cents per share, to
be paid on 21 June 2018 to all shareholders on SIML’s register at the close of business on 14 June 2018. At 0.47 cents per
share, the total dividend payment will be $1,716,895. This dividend will carry imputation credits of 0.1828 cents per share.
This dividend has not been recognised in the consolidated financial statements. SIML’s equity (non-controlling interest)
consists largely of retained earnings and the declared dividend represents 94% of SIML’s equity as at 31 March 2018.
There have been no other material events subsequent to balance date.
NOTE 28: EXPLANATORY MEMORANDUM FINANCIAL INFORMATION
On 10 June 2016, SPL issued an Explanatory Memorandum. The following is a comparison of the Prospective Base Case (PBC)
financial information included in the Explanatory Memorandum to Stride’s actual results for the year ended 31 March 2018.
2018
Actual
$000
2018
Prospective
Base Case
$000
Statement of Comprehensive Income
Net rental income 57,610 58 ,161
Management fee income 13,275 12, 886
Corporate expenses (13,826) (13,131)
Net finance expenses
(16,317 ) (16,616)
Profit before other income and income tax
40,742 41, 30 0
Net change in fair value of investment properties48,3411,14 3
Share of profit in associates9,4363 , 817
Other income – insurance recoveries
2,276–
Profit before income tax
100,795 46,260
Income tax expense
(5,541) (10,586)
Profit after income tax
95,254 35,674
Movement in cash flow hedges from continuing operations (28) 2,433
Changes in reserves in associates
(474)–
Total comprehensive income after tax
94,752 38 ,107
Statement of Financial Position
Current assets 48,577 7,084
Non-current assets 963,168 971,205
Current liabilities (20,210) (12,624)
Non-current liabilities
(324,387) (380,235)
Equity
6 6 7,14 8 585,430
NOTE 28: EXPLANATORY MEMORANDUM FINANCIAL INFORMATION
(CONTINUED)
2018
Actual
$000
2018
Prospective
Base Case
$000
Statement of Cash Flows
Net cash provided by operating activities 39,025 34,071
Net cash provided by/(applied to) investing activities 40,808 (143)
Net cash applied to financing activities (75,788) (33,681)
Net increase in cash and cash equivalents held 4,045 247
Commentary
Profit before other income and income tax is $558,000 lower than the PBC and reflects lower rental income and higher
maintenance costs, totalling $1,032,000, at 7-9 Fanshawe Street, Auckland, as a result of the fire damage sustained
(Fanshawe Street fire damage) on 26 May 2017 and lower net rental income of $376,000 as a result of the disposal of the
three Bunnings operated properties (Bunnings disposals) on 28 February 2018 to Investore Property Limited (Investore).
Offsetting this, a make good payment of $800,000 was received in relation to the property at 11 Springs Road, Auckland.
Profit before income tax is $54,535,000 higher than the PBC reflecting the higher share of profits in Investore of $5,370,000,
insurance recovery income received of $2,276,000 as a result of the Fanshawe Street fire damage and the fair value revaluation
movement of $47,198,000 in the investment properties. The PBC had assumed no increase in the portfolio value.
Income tax expense is lower by $5,045,000 than the PBC mainly due to the $5,040,000 tax deduction on the $18,000,000
payment made to Bunnings on the restructure of the leases at three properties in advance of the expiry dates (Bunnings
restructure).
The lower movement in cash flow hedges, net of tax, of $2,935,000 is a result of the movement in the interest rate curve as at
balance date as compared to the PBC where it had assumed that there was no change.
Equity is $81,718,000 higher than the PBC, of which $24,692,000 relates to the opening position as at 31 March 2017 and
$57,026,000 relates to the current year movement reflecting the net of the lower rental income, higher maintenance costs,
make good payment received, higher share of profits in Investore, insurance recovery income received, fair value movement
in investment properties, lower income tax expense and the movement in cash flow hedges as explained above.
Current assets are higher than the PBC as a result of the NorthWest Two, Auckland, property value of $36,277,000 being
classified as Inventory rather than investment property in non-current assets as per the PBC and higher cash on hand of
$5,637,000. Non-current assets are lower than the PBC reflecting the net effect of the Bunnings restructure and the subsequent
Bunnings disposals for $78,500,000, the classification of NorthWest Two as inventory, offset by the accumulated revaluation
movement in the portfolio (2017: $20,750,000 and 2018: $47,198,000), the construction of the new multi tenancy warehouse
and office facility development at 15 Rockridge Avenue, Auckland, of $11,878,000 and higher share of profits in associates
(2017: $3,531,000 and 2018: $5,619,000), than assumed in the PBC.
Current liabilities are higher by $7,586,000, reflecting the timing of the payment of capital expenditure works incurred and the
classification of $4,616,000 interest rate derivative contracts closed out subsequent to balance date. Non-current liabilities are
lower by $55,848,000, as a result of lower bank borrowings of $52,226,000, reflecting the net effect of the Bunnings restructure
and Bunnings disposals and a lower deferred tax liability of $2,194,000 which results from the split between the land and
building components in the assessed valuations as provided by the valuers differing from that assumed in the PBC.
In the statement of cash flows management fee income is higher by $7,347,000 and operating expenses are higher by
$6,402,000 reflecting the fees paid by SPL to SIML which were eliminated in the PBC. The higher net cash provided by
operating activities reflects the insurance proceeds received of $1,845,000 as a result of the Fanshawe Street fire damage
and lower income tax paid of $2,027,000. The higher net cash provided by investing activities and higher net cash applied
to financing activities reflects the net Bunnings disposals, the Bunnings restructure payment and higher capital expenditure
costs of $15,446,000, of which $10,980,000 was incurred in the current year on the development of a new multi tenancy
warehouse and office facility at 15 Rockridge Avenue, Auckland.
70
Notes to the Consolidated Financial StatementsNotes to the Consolidated Financial Statements
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Independent auditor’s report
The consolidated financial statements comprise:
• the consolidated statement of financial position as at 31 March 2018;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated statement of cash flows for the year then ended; and
• the notes to the consolidated financial statements, which include significant accounting policies.
Our opinion
In our opinion, the consolidated financial statements of Stride Property Group, which consists of Stride Property Limited
(SPL) and Stride Investment Management Limited (SIML) (together Stride), present fairly, in all material respects, the
financial position of Stride as at 31 March 2018, its financial performance and its cash flows for the year then ended in
accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) and International
Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs NZ) and International
Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s
responsibilities for the audit of the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of Stride in accordance with Professional and Ethical Standard 1 (Revised) Code of Ethics for
Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance Standards Board and the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
Our firm carries out other assurance services for Stride over tenancy marketing and operating expenses.
The provision of these other services has not impaired our independence as auditor of Stride.
To the shareholders of Stride Property Group
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the
consolidated financial statements are free from material misstatement.
Overall materiality was $2.2 million, which represents approximately 5%
of profit before tax excluding valuation movements relating to investment
properties.
We chose profit before tax, excluding valuation movements relating to
investment properties as the benchmark because, in our view, it is the
benchmark which best reflects the performance of Stride.
We agreed with the Audit and Risk Committee that we would report
to them misstatements identified during our audit above $110,000,
which represents approximately 5% of our overall materiality, as well as
misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
We have one key audit matter being the valuation of
investment properties.
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall materiality for the consolidated financial statements as a whole as set out above. These, together with qualitative
considerations, helped us to determine the scope of our audit, the nature, timing and extent of our audit procedures
and to evaluate the effect of misstatements, both individually and in aggregate on the consolidated financial statements
as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial statements and our
application of materiality. As in all of our audits, we also addressed the risk of management override of internal controls
including among other matters, consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consolidated
financial statements as a whole, taking into account the structure of Stride, the accounting processes
and controls, and the industry in which Stride operates.
Stride comprises SPL and SIML together, and any subsidiaries of SPL or SIML. The shares of SPL and SIML are stapled and
jointly listed on the NZX. The stapling is a contractual arrangement whereby the shares of SPL and SIML cannot be traded or
transferred independently of one another.
Materiality
Key audit
matters
Audit
scope
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Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current year. We have one key audit matter being the valuation of investment
properties. This matter was addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Key audit matterHow our audit addressed the key audit matter
Valuation of investment properties
As disclosed in note 11, the portfolio of investment
properties comprising office, industrial, retail, large
format retail, and land held for development, held by
SPL was valued at $866 million as at 31 March 2018.
Valuation of investment properties is inherently
subjective. A small difference in any one of the key
market input assumptions, when aggregated, could
result in a material misstatement of the value of
investment properties. We have, therefore, given
specific audit focus and attention to this area.
The valuations were performed on behalf of SPL by
independent registered valuers who are members of
the New Zealand Institute of Valuers. Valuers are
engaged by SIML, as the Manager of SPL, on terms
ensuring no one valuer values the same investment
property for more than three consecutive years.
Two approaches are generally used: the Income
Capitalisation approach and the Discounted Cash Flow
approach to arrive at a range of valuation outcomes, from
which the valuers derive a point estimate. The Stratum
Estates Capitalisation approach has also been used for
assessing the fair value of one property, wherein the
property value is assessed having regard to its potential
to be divided into individual Stratum Estates.
For each investment property, assumptions and
estimates are made in respect of:
• forecast future rentals, based on the location,
type and quality of the property, and supported by
the terms of any existing lease, other contracts or
external evidence such as current market rents for
similar properties
• vacancy assumptions based on current and expected
future market conditions after expiry of any current lease
• maintenance and capital requirements including
necessary investments to maintain functionality of
the property for its expected useful life and to
address seismic related matters
• the capitalisation rate to apply to future forecast rentals
• the discount rate derived from recent comparable
market transactions reflecting the uncertainty in the
amount and timing of cash flows.
The Manager verifies all key inputs to the valuations,
assesses property valuation movements against prior
year and holds discussions with the Directors on the
process and results of the valuation.
We held discussions with the Manager to understand:
• movements in SPL’s investment property portfolio
• changes in the condition of each property, and
• the controls in place over the valuation process.
We held separate discussions with the valuers to gain an
understanding of the assumptions used and the valuation
methodology applied.
On a sample basis, with particular emphasis on properties with
significant fluctuations as compared with the 2017 valuations,
properties where the key inputs moved outside our initial
expectations, and any other properties where we would have
expected a significant change in the valuation based on market
information and discussions with the Manager, we performed the
following procedures:
• obtained an understanding of the key inputs that caused the
valuation to have a substantial change
• where the changes were caused by market related key
assumptions (such as capitalisation rates or forecast future
rentals) used in the Income Capitalisation approach, we
compared these valuation metrics to:
- recent market activity (where also identified by other valuers),
taking into account location and environmental factors or
- newly agreed lease agreements
• agreed the forecast contractual rental and lease terms to lease
agreements with tenants
• considered whether seismic assessments have been taken into
account in the valuations
• analysed the underlying reason for differences outside a
threshold, between the Income Capitalisation approach value
and Discounted Cash Flow approach value by property.
We also engaged our own in-house valuation expert to critique
and independently assess, based on our expert’s market and
valuation knowledge, the work performed and assumptions used
by the valuers.
Because of the subjectivity involved in determining valuations for
individual properties and the existence of alternative assumptions
and valuation methods, there is a range of values which can be
considered reasonable when evaluating the independent property
valuations used by the Directors. If we find an error in a property
valuation or determine that the valuation is outside the reasonable
range, we evaluate the error or difference to determine if there is
a material misstatement in the consolidated financial statements.
The valuations adopted by the Directors were all within an acceptable
range. We also found no evidence of bias in determining the values.
Information other than the financial statements and auditor’s report
The Directors of SPL and SIML respectively are responsible for the annual report. Our opinion on the consolidated financial
statements does not cover the other information included in the annual report and we do not express any form of assurance
conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the
other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the consolidated financial statements
The Directors of SPL and SIML respectively are responsible, on behalf of Stride, for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as the Directors determine
is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the consolidated financial statements, the Directors of SPL and SIML respectively are responsible for assessing
Stride’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate SPL or SIML or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements, as a whole, are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ and ISAs will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the External Reporting Board’s
website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-1/
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the shareholders of SPL and SIML, as a body. Our audit work has been undertaken so that we
might state those matters which we are required to state to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone other than Stride and the shareholders of SPL and
SIML, as a body, for our audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Karen Shires.
For and on behalf of:
Chartered Accountants
30 May 2018
Auckland
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Diagram 1 – Governance Framework
Corporate Governance
“The overarching purpose of the NZX Corporate Governance Code 2017
is to promote good corporate governance, recognising that boards are
in place to protect the interests of shareholders and to provide
long-term value.” — NZX
The Governance Framework and Compliance
This section of the Annual Report provides an overview of the corporate governance policies and practices adopted and
followed by the Boards of Directors of Stride Property Limited (SPL Board) and Stride Investment Management Limited
(SIML Board) (which together are the Stride Board or Boards).
Stride Property Limited (SPL) and Stride Investment Management Limited (SIML) are ‘Stapled Entities’, with the ordinary
shares of SPL and SIML quoted on the NZX Main Board (NZX) equity securities market of NZX Limited under a single
ticker code ‘SPG’ (Stride), with Stride listed with a ‘non-standard’ (NS) designation. SPL and SIML are both companies
incorporated in New Zealand under the Companies Act 1993 (Companies Act).
The Boards are committed to the highest standards of business behaviour and accountability, and review and assess
Stride’s governance structures and processes to ensure these are consistent with best practice standards. As part of each
Board’s ongoing monitoring and review of the relevant entity’s governance framework, the Boards have developed separate
SPL and SIML Corporate Governance Manuals (Manual). Each Manual, along with the corporate governance framework
of SIML and SPL, have been reviewed by each Board during the year in review, to ensure the framework reflects the
requirements of the new NZX Corporate Governance Code 2017 (NZX Code). The Stride corporate governance framework
also takes into consideration contemporary standards in New Zealand.
This Corporate Governance section, which has been approved by the Boards of SPL and SIML, sets out the Boards’
commitment to best practice corporate governance and includes commentary on Stride’s compliance with each of the
eight corporate governance principles of the NZX Code for the year ended 31 March 2018 (FY18). For the reporting period,
Stride considers that its corporate governance practices do not materially differ from those in the NZX Code.
Stride’s governance framework is set out in Diagram 1.
Stride’s Website
For additional information on the corporate governance practices of SIML and SPL, refer to the Corporate Governance
section of Stride’s website at www.strideproperty.co.nz. The following key corporate governance documents are available
on that website:
• Constitutions of SPL and SIML
• Boards’ Charter
• Audit and Risk Committee Charter
and Audit Independence Guidelines
• Code of Ethics
• Health and Safety Charter
• Diversity Policy
• Securities Trading Policy
• Market Disclosure Policy
• Takeover Protocol
VIEW AT STRIDEPROPERTY.CO.NZ
RISK MANAGEMENT
INTEGRATED BUSINESS MODEL — PROPERTY INVESTMENT AND FUNDS MANAGEMENT
ACCOUNTABILITY
STRIDE BOARD OF DIRECTORS
AUDIT AND RISK
COMMITTEE
EXTERNAL
STAKEHOLDERS
SHAREHOLDERS
APPOINTMENT
OF DIRECTORS
INVESTORE SPL
DIVERSIFIED
2%
19.9%
EXTERNAL AUDITOR
SIML CEO/
MANAGEMENT
DELEGATIONS
OF AUTHORITY
MANAGEMENT
AGREEMENT
SPL
(PROPERTY INVESTMENT)
• Industrial
• Commercial Office
• Retail
• Large Format Retail• Retail Shopping
Centres
RISK MANAGEMENT/
INTERNAL CONTROLS
STAPLED ENTITIES
SIML
(REAL ESTATE MANAGER)
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Conflicts of Interest
The principles that govern the management of conflicts of interest are addressed in a number of governance
documents, including the Constitution of each of SPL and SIML, the Stride Boards’ Charter, the Code of Ethics,
the Employee Handbook and other internal policies.
The Boards have adopted a Conflicts Policy that provides guidance to Directors and SIML employees on when a conflict
of interest may arise and sets out procedures for managing conflicts of interest. The purpose of the Conflicts Policy is to
protect the integrity of decision-making within SPL and SIML, and SIML’s other managed entities, the reputation of each
of those entities, those who work within it, and those who own it.
Each Director is required to fully disclose to the Boards all relationships he or she has with SIML and SPL and all relevant
private or other business interests (which includes relationships with competitors or third party suppliers), in order for the
Boards to assess a Director’s independence, or interest in any particular transaction or matter. All disclosures of interest
(including the nature and extent of any interest) are recorded in the Disclosure of Interests Register for SIML and SPL,
which is tabled and reviewed at the beginning of each Board meeting.
As SIML is managing more than one investment entity, SIML has adopted an Acquisition and Leasing Protocol, which
is intended to assist SIML management and employees in making decisions in the event of any conflict between the
interests of SPL and SIML’s other managed funds (Investore Property Limited and Diversified NZ Property Trust).
All transactions in which SIML has, or may be perceived to have, a conflict of interest (which can include personal,
related party and fund conflicts) will be conducted in accordance with SIML’s established policy and protocols,
which may require the details of the conflict to be disclosed to all relevant parties. SIML’s conflicts manager,
who is the Company Secretary of SIML, oversees the application of the Conflicts Policy and reports to the SIML
Board to ensure that all conflicts are managed in an appropriate manner.
Securities Trading Policy and Guideline
The Boards have adopted a Securities Trading Policy and Guideline detailing Stride’s guidance and expectations for
trading in Stride securities.
These guidelines require Directors, SIML employees and their associated persons to obtain consent before they trade
in SPL or SIML shares.
The key elements of the Securities Trading Policy include:
• Insider trading is prohibited at all times.
• Limited trading windows are available during the year and are restricted to a 60 day window following Stride’s full
and half year results announcements, with the additional control that any Director or SIML employee intending to
trade must obtain the consent of the Chairman.
• Employees have a duty of confidentiality concerning any confidential information relating to Stride, its activities
and its managed funds, and as a general rule, are not permitted to disclose any such information to third parties.
NZX PRINCIPLE 1: CODE OF ETHICAL BEHAVIOUR
“Directors should set high standards of ethical behaviour, model this
behaviour and hold management accountable for these standards being
followed throughout the organisation.”
Code of Ethics
Stride is a behaviours-based organisation with four key behaviours that underpin business operations and differentiate
Stride from other organisations:
Discipline
Driven
Stride people go to great lengths to do the basics of our business incredibly well.
That means getting all the details right and having a rigorous process to evaluate every
opportunity. We astutely navigate risk, managing downside and seizing opportunities.
People
Centred
The success of every place we are involved with ultimately depends on satisfying
the wants and needs of people. At Stride we imagine ourselves in our tenants’
shoes and create the environment they will enjoy and prosper in.
Fresh
Thinkers
Stride people are at the forefront of new thinking on capturing the optimum value
for people from properties. Our feet are firmly on the ground while our heads
continuously scan new horizons for better ways of doing things.
Nimble
Performers
Our flat, tight structure and our size allow Stride and our people to be
highly responsive to changing conditions and make fast decisions.
The SIML and SPL Boards have adopted a Code of Ethics which is a formal statement acknowledging the commitment of
each Board, and SIML management and employees, to maintaining the highest standards of honesty, integrity and ethical
conduct in their day-to-day engagements and decision-making.
The Code of Ethics, which aligns to the principles of the Boards’ Charter, guides the Directors, SIML management
and employees in the practices necessary to:
• Maintain the highest standards of honesty, integrity and fairness in support of ethical decision making and behaviour;
• Adhere to all legal and compliance obligations;
• Avoid where possible an actual or perceived conflict of interest and where this is unavoidable, the process to
manage the conflict;
• Deal in a fair manner with employees, tenants, suppliers, stakeholders and shareholders; and
• Report unethical practices within Stride, providing a clear and transparent mechanism for addressing reported
incidents of behaviour that are inconsistent with the Code of Ethics.
The Code of Ethics is supported by other existing SIML management policies, including the Employee Handbook, the
Manual for each of SIML and SPL, the Conflicts Policy and Securities Trading Policy.
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Composition of the Boards and Director Appointment
The Constitution of each of SPL and SIML and the Boards’ Charter set out the parameters for the composition of each
Board, which at all times will be identical due to the ‘Stapled Entity’ structure, and will be as follows:
• A minimum of three Directors;
• A maximum of eight Directors; and
• At least one-third of the Directors will be Independent Directors (as that term is defined in the NZX Main Board Listing
Rules (Listing Rules)), of which two must be ordinarily resident in New Zealand.
Potential candidates for appointment as a Director are nominated by the SIML Board (in the absence of a Nominations
Committee) and are voted on by the shareholders of SIML. Under SPL’s Constitution, persons who are appointed as
Directors of SIML are automatically appointed as Directors of SPL.
The Boards may appoint Directors to fill a casual vacancy. Directors appointed to fill casual vacancies are required to retire
and stand for election at the first Annual Shareholder Meeting after their appointment.
To be eligible for selection, candidates must demonstrate the appropriate qualities and experience for the role of Director
and will be selected on a range of factors including property industry knowledge, business acumen, financial markets and
governance experience. Other factors include background, professional expertise and qualifications, measured against the
Board’s assessment of its needs at the time and having regard to the strategy of Stride.
At least one third of all Directors (or, if their number is not a multiple of three, then the number nearest to one third) will
retire at the Annual Shareholder Meeting each year and will be eligible for re-election at that meeting. In each year, the
Directors who retire are those who have been longest in office since their last election. Directors may be appointed for
further terms subject to their re-election being approved by shareholders.
At the beginning of FY18, the Boards were comprised of five non-executive and Independent Directors. One new Director,
Philip Ling, was appointed to the Boards on 26 June 2017 and was elected by shareholders on 6 September 2017, taking
the Boards of SIML and SPL to a total of six non-executive and Independent Directors each.
Board Independence
All of the Directors are considered to be “Independent Directors” under the Listing Rules, which in summary means that
they are not substantial shareholders in Stride and they are free of any business or other relationship that would materially
interfere with, or could reasonably be seen to materially interfere with, the independent exercise of their judgement
in acting as Directors of SPL and SIML. Materiality is assessed on a case-by-case basis and is based on qualitative
and quantitative factors, including assessing the strategic importance, nature and value of any relationship. For more
information on the independence criteria, refer to the Stride Boards’ Charter at www.strideproperty.co.nz
The Boards have reviewed the status of each of the Directors and taking into account the waiver granted by
NZX Regulation in relation to the independence of Directors that is summarised on page 100 under the heading
“Listing Rule 1.6.1” confirm that, as at the date of the release of this Annual Report, all Directors are independent.
The Directors of SPL and SIML who held the office of Director during the 12 months to 31 March 2018, their status and
date of appointment is set out on pages 6 and 7.
NZX PRINCIPLE 2: BOARD COMPOSITION AND PERFORMANCE
“To ensure an effective board, there should be a balance of independence,
skills, knowledge, experience and perspectives.”
Boards’ Role and Key Responsibilities
The SPL Board and the SIML Board are each responsible for the proper direction and control of the affairs and activities of
their respective entity. Each Board recognises that its primary role is to act in a manner that Directors believe is in the best
interests of the relevant company, thereby creating long-term value for shareholders and other stakeholders, and in the
case of SIML, having regard to the interests of SIML employees.
The Stride Boards’ Charter records each Board’s commitment to best-practice corporate governance and describes the
responsibilities and practices that underpin the role of Directors and those areas formally delegated to management.
Annually the Boards review the Stride Boards’ Charter to ensure it remains consistent with the Boards’ objectives and
responsibilities. A summary of the principal responsibilities of the Boards and management are set out in Diagram 2.
Diagram 2 — The Role of the Boards and Management
The Boards’ roles and responsibilities include:
• Setting the strategic direction and operating frameworks
of Stride and the individual entities.
• Overseeing the operations of Stride, ensuring that it is being
managed appropriately and has adequate resource to meet its
objectives.
• Adopting frameworks and systems designed to facilitate
Stride’s business being conducted in an honest, ethical,
responsible and safe manner.
• Reviewing budgets, business plans, dividend policy and
financial forecasts for each of SPL and SIML, and monitoring
the management of Stride’s capital, including the progress of
any significant capital expenditure, acquisition or divestments.
• Monitoring the financial performance of Stride and
the integrity of reporting, and establishing procedures to
ensure the timely and accurate reporting of financial results,
consistent with all legal and regulatory requirements.
• Approving and regularly reviewing Stride’s internal decision-
making processes and any strategic policies and procedures,
including any committee charters of the Boards.
• Implementing effective audit and risk management systems to
ensure Stride operates within the appropriate legal and group
approved risk parameters.
• Reporting to and communicating with shareholders in a timely
and balanced manner.
In recognising that the Board of SPL has appointed SIML as its
Manager, the SIML Board is responsible for the following:
• Delegating the day to day operations of Stride to the SIML Chief
Executive Officer and SIML management, subject to specific
limits of authority.
• Appointing and managing the succession of SIML’s Chief
Executive Officer, and overseeing the succession plans for
SIML management.
• Reviewing the remuneration and performance of the Chief
Executive Officer, consistent with Stride’s performance and
strategic direction.
The Chief Executive Officer and SIML management are
responsible for:
• Developing and making recommendations to the
Boards on Stride’s overall strategy and specific strategic
initiatives and work streams for SPL and SIML.
• Implementing robust health and safety policies and
procedures which support the Boards conducting
their business in a safe manner and meeting its
legal obligations.
• Executing and managing any of the Boards’ approved
strategic programmes.
• Applying the Boards’ approved policies and reporting
procedures to operational activity.
• Managing business risk in accordance with the risk
appetite approved by the Boards.
• Overseeing day-to-day management of Stride and
its operations.
Management’s responsibilities are subject to each Boards’
delegations of authority to the Chief Executive Officer and
management (including the separate delegation to SIML’s
management by each fund under management) and such
other rights and powers reserved to each Board from
time to time.
BOARD OF DIRECTORS OF SPL AND SIML
SIML CHIEF EXECUTIVE OFFICER AND MANAGEMENT
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Independent Advice, Professional Development and Training
All Directors may access such information and seek such independent advice as they individually or collectively consider
necessary to fulfil their responsibilities and permit independent judgement in decision-making and, with the Chairman’s
consent, may seek independent professional advice at Stride’s expense.
The Boards are committed to continued professional development to enable Directors to maintain the knowledge and skill
set required for the office of Director of a listed issuer and to provide Directors with knowledge specific to the property
industry and new regulatory and governance practices.
Director development is provided through regular management updates on key business functions, industry and portfolio
wide developments, and access to external education and professional development training at Stride’s expense.
Ongoing training takes the form of individual Director training or the collective training of the Boards. A particular focus
for the year in review was a strategy day for the Boards, with external expert speakers presenting on a range of topics,
including; the current domestic and international economic environment; the demographic make-up of key New Zealand
centres and forecast growth and subsequent demand for property; and technological changes and their impact on future
retail trends and other parts of the property market.
Independence of the Board Chairman
The roles of the Chairman of the Boards and the Chief Executive Officer of SIML are exercised by different persons.
Boards’ Self-Review
The Boards undertake an annual evaluation of their performance. For FY18, the Boards’ self-review and evaluation process
was conducted utilising online questionnaires generated by the New Zealand Institute of Directors, appraising the Boards
as a group, the Chairman and the Chief Executive Officer.
Diversity
Stride takes a holistic view of diversity that is broader than gender and that is anchored around inclusiveness and an
appreciation of diversity of thought, and includes those differences resulting from an individual’s experiences, age,
religious belief, capabilities, sexual preference, family and cultural heritage. SIML, which is the employing entity of
Stride, is committed to promoting diversity within the workplace by attracting, recruiting, developing, promoting and
retaining the highest calibre of employees from a diverse pool of individuals.
Stride’s Diversity Policy embraces four key principles:
Merit
Individuals are evaluated based on their individual skills, performance
and capabilities
Fairness &
Equality
Stride does not tolerate any discrimination or harassment in the workplace of any
kind, including, but not limited to, in recruitment, promotion and remuneration
Promotion of
Diverse Ideas
Stride values diversity in skills, backgrounds, and ideas which come
from a diverse workforce
Culture
Stride believes that diversity is a strong contributor to a rich workplace
culture, where individuals are free to be themselves and thrive within Stride
Director Nomination Process and Induction
The SIML Board undertakes appropriate pre-appointment checks before appointing a Director, or putting forward
to shareholders a candidate for election as a Director. This may include background checks on character, education,
employment experience, criminal history, and bankruptcy checks, to assess suitability. The profile and key information
of Director candidates standing for election or re-election at the Annual Shareholder Meeting is set out in the Notice of
Meeting.
Formal letters of appointment are issued to all new non-executive Directors setting out the key terms and conditions of
their appointment.
New Directors are provided with an induction pack containing a Directors’ duties guide, governance information, key
policies and all other relevant information necessary to prepare new Directors for their role. New Directors also participate
in an induction programme led by the Chairman, designed to provide new Directors with an overview of Stride, the market
in which it operates and key personnel.
Directors’ Skills and Experience
Each Board is structured in such a way that its composition continues to include Directors who collectively have a mix of
skills, knowledge, experience, and diversity to meet and discharge the Boards’ responsibilities. A balance is maintained
between long serving Directors with experience and knowledge of the property sector and Stride’s history, and new
Directors who bring fresh perspective and insight. This was reflected for the year in review, with the appointment of
a sixth Director, Philip Ling.
Set out below in Diagram 3 is a summary of the identified mix of skills and experience among Directors that the Boards
currently seek to maintain and develop.
Diagram 3 — Directors’ Skills Matrix
TECHNICAL & INDUSTRY KNOWLEDGE
• Property development, investment
and management
• Funds management sector
• Capital markets and capital structure
• Customer, retail and marketing
• Accounting and actuarial disciplines
• International business
• Law
GOVERNANCE
• Non-executive Director experience
• Private sector and/or listed
company experience
• Understanding financial risk management
• Knowledge of the New Zealand
regulatory environment
• Community, shareholder and stakeholder
connectivity
CORE COMPETENCIES
• Well-developed faculty for critical and
strategic analysis
• Knowledge of the roles, responsibilities and
duties of a Director
• Understanding of the distinction between
corporate governance and management
• Leadership skills
• Strong communicator
• Good interpersonal skills to suit varied
environments
PERSONAL ATTRIBUTES
• High ethical standards and integrity
• Flexibility to consider change and
new ideas
• Capable of taking a broad perspective
on issues
• Ability to work as a team member and
to listen to others
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1
The term ‘Officer’ is defined in the Listing Rules and aligned to the interpretation given under the Financial Markets Conduct Act 2013 (relating to the
definition of ‘senior manager’), i.e., a person, however designated, who is concerned or takes part in the management of the public issuer’s business.
SIML deems this to be the Chief Executive Officer and the Chief Executive Officer’s direct reports (excluding administrative support staff).
NZX PRINCIPLE 3: BOARD COMMITTEES
“The board should use committees where this will enhance its
effectiveness in key areas, while still retaining board responsibility.”
Board Committee Governance
The SPL and SIML Boards have one standing committee to assist in carrying out their responsibilities and appoint other
sub-committees from time to time to deal with projects relating to Stride’s activities.
Committees play a crucial role in the governance framework, considering matters on behalf of the Boards and, subject
to the terms of the committee’s charter, referring matters to the Boards for decision, with a recommendation from the
committee or, where the committee acts with delegated authority, determining matters which it then reports to the Boards.
To ensure Directors remain informed on all material matters impacting Stride’s business, copies of all committee reports
and any other relevant resource material are made available to all Directors. Directors who are non-committee members
may attend meetings of a committee. The Boards receive an update from the Chair of the committee on an ongoing basis.
Details of the membership, composition and responsibilities of Stride’s one standing committee is set out in Diagram 4.
Diagram 4 – Composition and Committee Responsibilities
As at 31 March 2018:
• For the Boards of Stride and SIML, one out of six Directors were women (17%) (by comparison for FY17, one out of five
Directors were women (20%));
• For the Officers
1
of SIML, two out of six officers were women (33%) (by comparison for FY17, one out of four Officers
were women (25%)).
The Stride Diversity Policy records the commitment of both the SPL Board and SIML Board to an inclusive environment
that embraces and promotes diversity through a number of initiatives, which support the belief that diversity is an essential
component to success, strengthening Stride’s performance both at a governance and operational level.
Stride has conducted its annual assessment of its diversity objectives for FY18 and its progress towards achieving these
objectives. The Boards consider that SPL and SIML have achieved their objectives under the Diversity Policy for FY18, with
a summary provided in Table 1 below.
Table 1 – FY18 Measurable Objectives for Diversity
ObjectiveProgress as at 31 March 2018
Diversity
Initiatives
Reporting — Undertake
bi-annual reporting to the
Boards on diversity
related matters
As at 31 March 2018, the staff of SIML comprised 63% women and 37% men.
Recruitment — Ensure
procedures provide for a
wide range of potential
candidates to be considered
at all levels of Stride’s
structure, including at
both Board and senior
management level
SIML utilises a variety of channels to ensure a range of suitably qualified
candidates are identified for available roles within Stride. These channels include
the use of external recruiting agencies as appropriate, internal referrals, and
consideration of internal candidates. All candidates are vetted to ensure they
hold appropriate qualifications and skills. Suitable candidates then undergo
a comprehensive interview process, and a number of checks are undertaken
before an offer of employment is made. These checks include reference checks,
psychometric testing (appropriate to the role) and police checks for all staff, and
credit checks for those who will be handling cash/cash equivalents and those
joining SIML’s Finance team.
During the period from 1 April 2017 to 31 March 2018, 42 roles were filled
(excluding casual shopping centre staff) through the following channels:
recruitment agency, internal, self-referral, referral by staff and direct recruiting.
Pay Equity — Regularly
review remuneration
to ensure that there is
pay equity at all levels
to minimise inadvertent
discrimination that may
affect retention and career
progression, which in turn
may affect diversity at senior
management levels
SIML is committed to a fair and balanced approach when deciding reward and
remuneration outcomes for employees. Methodologies adopted to enable a
robustly tested and balanced outcome include:
• Enlisting external consultancy firms to benchmark key roles bi-annually
against market rates.
• The performance management framework includes an objective review of
KPIs and performance measures for individuals and teams, resulting in an
overall performance rating for each employee. This objective performance
rating is then validated across the organisation to test the benchmark of
excellence internally. Executives challenge their thinking as a collective
when validating employees’ performance and ensure the statistical analysis
includes a review of gender against performance ratings.
Gender balance is recognised as being important to the attraction and retention of the best talent and the creation of an
environment and work culture where individuals thrive and the performance of Stride is enhanced.
STRIDE AUDIT AND RISK COMMITTEE
John Harvey (Chair), Michael Stiassny (Independent), Tim Storey (Independent),
Philip Ling (Independent), David van Schaardenburg (Independent)
The principal purpose of the Audit and Risk Committee is to assist the Boards
in the proper and efficient discharge of its responsibilities in relation to:
BOARD OF DIRECTORS OF SIML AND SPL
• The integrity of external financial
reporting prepared by
management
• Financial management
• The risk-management framework
and the monitoring of compliance
within that framework
• Appointment and performance of the
external auditors, and any one-off project
based engagement of professional services
• Related-party transactions
• Accounting policy and practice
• Internal control systems
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Table 2 – Directors’ Meeting Attendance
SPL
Note 1
SIML
Note 1
Audit and Risk
CommitteeStrategy Day
Number of meetings FY1851031
Tim Storey
51031
John Harvey
Note 2
51031
Philip Ling
Note 3
4821
David van Schaardenburg
51031
Michael Stiassny
5931
Michelle Tierney
Note 4
51031
Note 1
This excludes two conference calls.
Note 2
John Harvey is also a member of an internal steering committee to oversee the implementation of the new financial and property management system
(Yardi) and his attendance at these meetings throughout FY18 has not been reflected in this table.
Note 3
Philip Ling was appointed as a Director on 26 June 2017.
Note 4
Michelle Tierney is not a formal member of the Audit and Risk Committee, but attendance at the Committee meetings is noted.
Takeover Protocols
While the Boards have not established a standing independent Takeovers Committee, the Boards have adopted appropriate
protocols to guide the Directors in the event there is, or is the possibility of, a takeover offer or similar control transaction in
respect of Stride.
NZX PRINCIPLE 4: REPORTING AND DISCLOSURE
“ The Board should demand integrity in financial reporting and in the
timeliness and balance of corporate disclosures.”
Market Disclosure Policy
To meet the requirements of the NZX, Stride has adopted a Market Disclosure Policy to provide guidance in the area of
market disclosure and the release of material information.
Both SPL and SIML are committed to:
• Ensuring that shareholders and the market are provided with full and timely information about their activities;
• Complying with the general and continuous disclosure principles contained in the Listing Rules
and the Financial Markets Conduct Act 2013; and
• Ensuring that all market participants have equal opportunities to receive externally available information
issued by Stride.
A Disclosure Committee, comprising the Chairman of the Boards, SIML’s Chief Executive Officer, SIML’s Chief Financial Officer
and SIML’s General Manager Corporate Services (Disclosure Officer), is responsible for making decisions about information
that constitutes material information and ensuring that appropriate disclosures are made in a timely manner to the market.
Committees
Audit and Risk Committee
Stride’s Audit and Risk Committee’s Charter requires that the Audit and Risk Committee be comprised solely of non-executive
Directors, have at least three members, with the majority of members being Independent Directors. The Chair of the Audit
and Risk Committee is to be an Independent Director and may not be the Chairman of the Boards. All Audit and Risk
Committee members are expected to have an appropriate degree of financial acumen suitable for the position of Audit
and Risk Committee member and at least one member must have accounting or related financial management expertise.
Diagram 4 notes the membership of the Audit and Risk Committee.
Meetings of the Audit and Risk Committee are held at least twice a year, having regard to the Stride companies’ reporting
and audit cycle. Additional meetings may be held at the discretion of the Chair, or if requested by any Audit and Risk
Committee member, the Chief Executive Officer of SIML or the external auditor.
The NZX Code recommends that Directors who are not members of the Audit and Risk Committee and employees should
only attend meetings at the invitation of the Audit and Risk Committee. Stride’s Audit and Risk Committee Charter does not
prevent Independent Directors who are not members of the Audit and Risk Committee from attending meetings, and the
Chief Executive Officer and the Chief Financial Officer of SIML and the external auditor have a standing invitation to attend
Audit and Risk Committee meetings.
The Audit and Risk Committee aids each Board in fulfilling its responsibilities to shareholders and the investment
community, in relation to the corporate accounting and reporting practices of SPL and SIML, and the quality, integrity and
transparency of Stride’s financial reports. In so doing, it is the responsibility of the Audit and Risk Committee to maintain
free and open communication between the Directors and the external auditors about the financial management of each of
the Stride companies.
Remuneration and Nomination Committee
The NZX Code recommends that a Remuneration Committee and a Nominations Committee be established to address:
• The benchmarking of remuneration packages for Directors and senior employees; and
• The recruitment and appointment of Directors.
For many issuers, these two objectives are combined into one Remuneration and Nominations Committee function.
As reported in the FY17 Annual Report, on 18 January 2017 the Boards assumed the role of the Remuneration and
Nominations Committee while recruiting for a new Chief Executive Officer for SIML. All Directors were members of the
Remuneration and Nominations Committee, as it was considered more appropriate for the Boards as a whole to take over
this function. This model has continued.
During FY18, the Boards successfully recruited a new Chief Executive Officer, Philip Littlewood, and appointed a new
Director, Philip Ling.
Boards and Committee Meetings and Attendance
The SIML Board schedules a minimum of 10 meetings each year and the SPL Board schedules a minimum of 5 meetings
each year, at which Directors receive written reports and presentations from the Chief Executive Officer and management,
providing monthly monitoring, presenting and updating Directors on strategy and recommending matters for each Board’s
approval. Additional meetings are called as required.
The number of each of the Board and committee meetings held during FY18 and details of Directors’ attendance at those
meetings is contained in Table 2. There were no additional or temporary project-based committees constituted for FY18.
In addition to meeting attendance, Directors also visited SPL assets and managed assets throughout FY18, attended
briefings with senior managers on an ad-hoc basis and attended investor briefings.
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A key focus for FY19 is to formalise Stride’s ESG policy and initiatives, which currently operate on a more informal basis.
With the recent appointment in the year in review of a General Manager Corporate Services and dedicated resource in
the form of a newly created corporate services team, Stride will be well placed to formalise an appropriate sustainability
strategy and programme.
Stride is aware that in order to attract the best people, it needs to continue to be socially responsible, as employees
are increasingly focused on corporate social responsibility initiatives and activities undertaken by their employers.
Further social initiatives are planned for FY19, including, a volunteer day, encouraging employees of SIML to take
paid leave and spend the day in a charity of their choice.
A risk to SPL is that people choose where they shop or work based not only on location and price, but also on more
intrinsic factors such as the environmental sustainability of the building or centre. Both SPL and SIML are aware of
this and are taking positive steps to improve the environmental sustainability of the properties it owns and manages.
Some examples of the steps that are being taken include:
• Tesla EV charging stations are being installed at Remarkables Park Shopping Centre, owned by Diversified NZ Property
Trust and managed by SIML.
• Silverdale Centre, a shopping centre owned by SPL and managed by SIML, which recycles over 240 wooden pallets
each year through Reharvest Timber Products, which turns the pallets into garden mulch.
• Silverdale Centre also partnered with All Heart New Zealand to recycle used carpet tiles. These carpet tiles were
re-used at an Auckland marae, reducing the waste going to landfill and supporting the local community with
extra resources.
• Shopping centres not already operating energy efficient lighting, are transitioning to LED lighting which is significantly
more energy efficient than traditional forms of lighting, thus placing fewer demands on the environment.
NZX PRINCIPLE 5: REMUNERATION
“ The remuneration of directors and executives should be transparent,
fair and reasonable.”
Remuneration and Our People Strategy
Details of Board and senior executive remuneration are included in the Remuneration Report on pages 93 to 95
of this Annual Report.
SIML, the Stride entity which employs our people, aims to be the place where talent wants to work and an employer of
choice, attracting and retaining people who have industry knowledge and most importantly, exemplify Stride’s four key
behaviours; discipline driven, people centred, fresh thinkers and nimble performers (for further information on each
behaviour, refer to page 17 of this Annual Report). Stride believes that this mix of characteristics builds great teams who
create the environments our stakeholders will enjoy and prosper in.
A key focus in FY18 has been, and continues to be, our people. Having successfully executed an ambitious business
strategy and, as a result, grown significantly during FY17, the focus for FY18 has been on ensuring Stride is resourced
appropriately and continues to focus on attracting and retaining the best and most capable people to the business. To
do this, SIML has focused on putting in place appropriate practices and systems (such as talent and succession planning
and performance related pay), creating a sustainable and healthy working environment and investing in a culture that ensures
Stride’s ongoing success. For more information on our People, refer to pages 18 and 19 of the Annual Report.
Integrity of Financial Reporting
The Audit and Risk Committee is tasked with overseeing the quality and integrity of all financial reporting. The Audit and
Risk Committee reviews the annual and half-year financial statements and has direct access, as necessary, to Stride’s
external auditors. As the Boards are ultimately responsible for preparing the Annual Report (including the financial
statements and ensuring they align with generally accepted accounting practice), annual financial statements are signed
by two Directors after approval by the full Boards and the external auditors provide an opinion that the financial statements
present fairly, in all material respects, the financial position of SPL and SIML and each of their financial performance and
cash flows for the year then ended, in accordance with New Zealand Equivalents to International Financial Reporting
Standards and International Financial Reporting Standards.
Corporate Governance Documents and Stride Reports
The Boards’ Charter and Audit and Risk Committee Charter, annual and interim reports, announcements, key corporate
governance policies as recommended in the NZX Code and other investor-related material, are available on
the Stride website at www.strideproperty.co.nz
Financial / Non-Financial Disclosure
Financial Reporting
Stride is committed to appropriate financial and non-financial reporting. Oversight of SPL and SIML’s financial reporting
is applied through the Audit and Risk Committee, as discussed in the commentary under NZX Principle 3.
Non-Financial Reporting
Stride entities are committed to addressing issues related to Environmental Sustainability, Social Responsibility and
Corporate Governance (ESG).
Stride’s four strategic pillars of People, Places, Performance and Products requires equal focus on each pillar (see Diagram 5).
Acting in the best interests of Stride requires the Boards to take regard of its people and other key stakeholders, which
includes the communities in which Stride or its funds have a presence and operate, enabling the effective implementation
of Stride’s strategy. As an organisation, Stride is increasingly focused on engagement that brings it closer to its communities,
builds better social behaviors and rewards, and ensures investments are sustainable and enduring. For examples of the
programs and targeted community partnerships Stride is involved in, refer to pages 22 and 23.
Diagram 5 – Stride’s Four Strategic Pillars
STRIDE
STRATEGIC PILLARS
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NZX PRINCIPLE 6: RISK MANAGEMENT
“Directors should have a sound understanding of the material risks faced
by the issuer and how to manage them. The board should regularly verify
that the issuer has appropriate processes that identify and manage
potential and material risks.”
Risk Management Framework
The identification and effective management of the risks of Stride and its operations is a priority of the Boards. The Boards
are responsible for overseeing and approving the risk management strategy and policies, as well as ensuring effective
audit, risk management and compliance systems are in place. The Audit and Risk Committee assists the Boards in fulfilling
their risk assurance and audit responsibilities.
Stride has in place a risk-management framework which is supported by a set of risk based policies appropriate for the
business, including a Treasury Policy, a compliance based Manual, Conflicts Policy, Investment Mandates across each
fund and Delegations of Authority Policy for each fund. The principal purpose of this framework is to integrate risk
management into Stride’s operations, and to formalise risk-management as part of Stride’s internal control and
corporate governance arrangements.
At a practical level the Stride business risk management processes and policies minimise exposure to financial and
operational risk. Internal systems have been designed to:
• Identify material risks;
• Assess the impact of specific risks;
• Identify strategies to mitigate risk; and
• Monitor and report progress on risk mitigation strategies.
Management of Health and Safety Risk
Stride is committed to ensuring that all workers, including employees, consultants and contractors, tenants, and members
of the public, are safe from harm at work or while on any site owned by SPL or managed by SIML.
Stride’s health and safety policy and framework reflects Stride’s commitment to health and safety and it is recognised across
the Boards of SIML and SPL, as well as SIML’s managed funds, that effective governance of health and safety is essential
for the continued sustained success of Stride and its operations, the wellbeing of our people and others who occupy or visit
Stride owned or managed properties. The Boards have recently reviewed the Health and Safety Charter, which sets out the
Boards’ commitment and approach to health and safety governance. The Boards’ Health and Safety Charter is available on
the website at www.strideproperty.co.nz. The revised Health and Safety Charter reflects that the Boards as a whole are
responsible for the governance of health and safety, and have responsibility for leading the health and safety culture and
vision at Stride. Health and safety is one of the first agenda items at all Board meetings for both SPL and SIML. The Board of
SIML also recognises that in managing properties owned by SPL, Investore and Diversified, SIML is responsible for managing
health and safety risks of those properties as well as risks related to the activities of its employees. SIML employees regularly
visit and assess risks at the properties managed by it, and have particular focus on risks associated with construction
activities on sites for development. SIML recognises that members of the public regularly visit many of the properties
managed by it, and this requires vigilance in assessing and managing health and safety risks.
Our health and safety risks are assessed using the same risk assessment methodology that we use to assess other risks.
Health and safety risks are identified and considered in terms of their impact, likelihood and overall risk rating, with specific
mitigating plans in place for each risk. SIML works closely with tenants to minimise and, where practicable, eliminate all
property related risks.
SIML records all incidents at properties managed by it, whether or not the risk is within the control of SIML or not.
Particular attention is paid to near misses, given the benefit of a near miss for learning and avoiding an incident.
NZX PRINCIPLE 7: AUDITORS
“The board should ensure the quality and independence of the external
audit process.”
External Audit Function and Audit Independence
PricewaterhouseCoopers is the auditor of Stride. The Listing Rules require rotation of the lead audit partner at least every
five years and this requirement is reflected in Stride’s Audit and Risk Committee Charter and Audit Independence Guidelines.
The purpose of the Audit Independence Guidelines is to ensure that audit independence is maintained, both in fact and
appearance, so that SIML’s external financial reporting is both reliable and credible. The guidelines provide guidance on
the provision of external audit services by any person engaged to perform external audit services for Stride.
The Audit and Risk Committee meet at least twice a year with the external auditors. The external auditor is invited to attend
meetings of the Audit and Risk Committee as required, with Directors free to make direct contact with the external auditor
as necessary to obtain independent advice and information.
In the interest of encouraging active participation by shareholders at the Annual Shareholder meeting, Stride’s external auditor
is in attendance to answer any questions shareholders may have in relation to the audit of the annual financial statements.
Internal Audit Function
Stride engages consultants to undertake internal reviews or assessments on a project-by-project basis, with the selected
provider engaged to assess, amongst other things, Stride’s internal control systems, risk management and the integrity
of the financial information reported to the Boards. Project based reviews or assessments can operate both with and
independently from management, with all findings reported to the relevant Board.
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Directors’ Remuneration
Directors are remunerated in the form of Directors’ fees, approved by shareholders, including a higher level of fees for the
Chairman of the Boards and Chair of the Audit and Risk Committee, to reflect the additional time and responsibilities that
these positions involve.
In FY18, shareholders approved an increase in Directors’ fees by an aggregate amount of $50,000 (i.e. total fees increased
from $710,000 p.a. to $760,000 p.a), which took effect from 1 September 2017. The allowance for additional work and
attendance remained the same.
It was previously signalled to the market in 2015 that Stride intended to review Directors’ remuneration in 2017 and that it
believed it was appropriate to review Directors’ remuneration on a two yearly cycle thereafter. As part of this process, the
SIML Board engaged independent board and executive consultants for advice and benchmarking data on current Directors’
remuneration, compared to entities similar in size and complexity to Stride. The consultant’s summary report was made
available to shareholders and the market. Stride is conscious of the obligation to ensure Directors’ remuneration is set
and managed in a manner which is fair, flexible and transparent.
No Director of SPL or SIML is entitled to any remuneration from Stride other than by way of Directors’ fees and the
reasonable reimbursement of travelling, accommodation and other expenses incurred in the course of performing duties or
exercising their role as a Director. Directors do not participate in any Stride share or option plan.
The following people held office as Directors during the year to 31 March 2018 and received the following remuneration
during the period:
Table 3 – Director Remuneration FY18
Director
Allowance for
Additional
Attendance
SIML
F Y18 Fees
SPL
F Y18 Fees
Tim Storey
140,000
Note 1
74,37574,375
John Harvey 46,87546,875
Philip Ling
Note 2
33,33333,333
Michael Stiassny 43,95843,958
David van Schaardenburg
43,95843,958
Michelle Tierney 43,95843,958
Total
Note 3
$140,000$286,457$286,457
Note 1
In FY18 SIML paid the Chariman, Tim Storey, an amount of $140,000 out of the allowance for additional work and attendance, as further described below.
Note 2
Director Philip Ling was appointed on 26 June 2017.
Note 3
Total Directors’ fees exclude GST and reimbursed costs directly associated with carrying out Director duties, for example travel.
Additional Pool
The Boards may determine the allocation of all or part of the allowance for additional work and attendances to remunerate
Directors for significant extra attendances and work. In FY18, part of the additional pool was allocated by the SIML Board
to Director Tim Storey, to reflect work undertaken by him in support of SIML and its operations, while SIML was without a
Chief Executive Officer for the period of 20 December 2016 to 25 June 2017. Following receipt of independent advice on
the appropriate form and amount, the SIML Board approved the payment of $140,000 to Tim Storey.
NZX PRINCIPLE 8: SHAREHOLDER RIGHTS AND RELATIONS
“The board should respect the rights of shareholders and foster
relationships with shareholders that encourage them to engage
with the issuer.”
Investor Relations
The Boards believe a high level of disclosure and communication to shareholders is important. Shareholders deserve to
be provided with all relevant information about the performance of their investment and to be informed on any significant
transactions by Stride and its entities. Stride is committed to notifying the market of any material information related to its
operations, as required by the Listing Rules. It is mindful of the need to keep stakeholders informed through a timely, clear
and balanced approach which communicates both positive and negative news.
The Boards have adopted a Market Disclosure Policy that establishes procedures which are aimed at ensuring Directors
and management are aware of and fulfil their disclosure obligations under the Listing Rules. A Disclosure Committee,
which is comprised of senior executives and the Chairman of the Boards, is responsible for ensuring that Stride complies
with its disclosure obligations. Significant market announcements, including the preliminary announcement of the half year
and full year results, the accounts for those periods and any advice of a change in earnings forecast, all require the prior
review and approval of each Board.
In addition to these general disclosure obligations, the Market Disclosure Policy requires Directors and management to
regularly consider whether there is any information that may require disclosure in accordance with the Market Disclosure Policy.
Stride Property Group Website and Available Material
Stride’s website is used to complement the official release of material information to the market, enabling broader access
to information by investors and stakeholders. Stride’s website has copies of all presentations and reports, and shareholders
are encouraged to refer to the website at www.strideproperty.co.nz
Reporting to shareholders is provided through the Annual Report and Interim Report. Events of interest within SPL’s
portfolio or which relate to SIML’s business that occur between regular reporting periods are communicated online,
via market announcements to the NZX (www.nzx.com) using ticker code SPG, and on the Stride website. The Annual
Report and Interim Report are available electronically on the Stride website and shareholders can request hard copies
by contacting the Share Registrar (contact details can be found in the corporate directory on page 103 of this Annual Report).
Stride encourages shareholders to provide email addresses to enable the receipt of shareholder communication
by electronic means. As at 31 March 2018, 31% of Stride’s shareholders elect to receive their investor
communications electronically.
Shareholder Voting and Participation at the Shareholder Meetings
In respect of voting rights, Stride’s shareholders have one vote per share they hold in each of SPL and SIML, and will have
the right to vote on major decisions in accordance with the Listing Rules.
The Boards encourage active participation by shareholders at the Annual Shareholder Meeting of SIML and SPL and
shareholders may submit questions at the meeting. In addition to the auditors, Stride’s legal advisers and share registry
provider are in attendance. The Notice of Meeting and transcripts of the meeting are available on Stride’s website.
In order for shareholders to fully participate in meetings, the Boards will endeavour to circulate the Notice of Meeting, and
also make it available on Stride’s website, as soon as possible and at least 28 days prior to the Annual Shareholder Meeting.
The next Annual Shareholder Meeting for SPL and SIML is scheduled for 30 August 2018.
Remuneration Report
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Long Term Share Performance Rights20182017
Opening balance258,027662,212
Rights granted622,483–
Rights exercised(133,068)(378,372)
Rights forfeited–(25,813)
Closing balance
747,442
258,027
KiwiSaverAll employees are eligible to contribute and receive matching SIML contributions of up to 4%
of gross taxable earnings (including short-term incentives).
Chief Executive Officer Remuneration
As noted in the FY18 Annual Report, Philip Littlewood (who was previously the General Manager Investment Management
for SIML) was acting joint Chief Executive Officer from 1 April 2017 to 25 June 2017 and was appointed to the role of SIML’s
Chief Executive Officer on 26 June 2017. The Chief Executive Officer remuneration detail provided below relates to salary
and other benefits paid, incentive payments accrued, KiwiSaver, and the value of share rights issued to Philip Littlewood
for the year ended 31 March 2018.
Table 4 – Chief Executive Officer Remuneration
Philip Littlewood
31 March 2018
Salary459,615
Short Term Incentive 150,000
Executive Long Term Incentive 220,212
KiwiSaver 21,385
Other
10,638
$861,850
Remuneration of employees
*
There were 34 SIML employees who received remuneration and benefits in excess of $100,000 (not including Directors)
in their capacity as employees during the year ended 31 March 2018, as set out in Table 5 below.
Table 5– Remuneration Range
Employees
$100,000 — $109,9993
$110,000 — $119,9994
$120,000 — $129,9992
$130,000 — $139,9992
$140,000 — $149,9994
$150,000 — $159,9992
$160,000 — $169,9992
$170,000 — $179,9991
$180,000 — $189,9992
$190,000 — $199,9993
$200,000 — $209,9993
$210,000 — $219,9991
$280,000 — $289,9991
$340,000 — $349,9991
$460,000 — $469,9991
$650,000 — $659,9991
$860,000 — $869,999
1
Total
34
* This includes salary and benefits paid, employer KiwiSaver contributions and incentive payments accrued for the year ended 31 March 2018 and the value
of share rights issued to members of the executive team.
No Additional Remuneration for Subsidiary Directors
No Director of a subsidiary company of Stride (a list of subsidiary companies and Directors is set out in the Statutory
Disclosures at page 97) received any remuneration or other benefits during the period in relation to their duties as
Directors of a subsidiary company, other than the benefit of an indemnity from each of SPL and SIML and the benefit
of insurance cover in respect of all liabilities (to the extent permitted by law) which arise out of the performance of their
normal duties as Directors, unless the liability relates to conduct involving a lack of good faith.
Senior Management Remuneration
SIML is committed to a fair and reasonable remuneration framework for its executives. SIML’s total remuneration policy
for its senior executives provides the opportunity for them to be paid, where individual and overall company performance
merits, in the median quartile for equivalent market-matched roles, aligned to compensation that is competitive in the
labour markets in which SIML competes for staff. In determining an executive’s total remuneration, external benchmarking
is undertaken by external remuneration advisors every two years to ensure comparability and competitiveness, along with
consideration of the individual’s performance, skills, expertise and experience.
Performance evaluations of the Chief Executive Officer and each member of senior management took place during FY18.
Total executive remuneration can be made up of three components: fixed remuneration, short-term incentive scheme
and an executive long-term incentive scheme. Each component is explored in more detail below:
Fixed
remuneration
Fixed remuneration consists of base salary, with SIML’s policy to pay fixed remuneration for executives
based on the market median.
Short-term
incentive scheme
SIML operates a short term incentive scheme under which selected permanent, full-time employees
can become eligible to receive a cash incentive on an annual basis in addition to their base salary.
Entitlement to the incentive is subject to pre-agreed hurdles being met, which are aligned to Stride’s
performance targets for the year and tailored key performance targets for the eligible executive.
Stride’s performance targets define objectives and measures in the areas of financial performance,
operational excellence, people development and safety. Each short-term performance incentive
remuneration target is expressed as a percentage of base salary and is set and evaluated annually.
Executive
long-term share
incentive scheme
SIML operates a long term share incentive scheme for the executive team. This plan is intended to align
the interests of key employees with the interests of shareholders and provide a continuing incentive to
key employees over the long term. Share performance rights under the SIML long term share incentive
scheme may be issued on an annual basis. However, under the terms of this scheme eligible participants
and offers of further share performance rights may be modified by the SIML Board from time to time,
subject to the requirements of the Listing Rules and applicable laws.
The plan provides for the selected employees to be granted rights to be issued shares for nil
consideration if certain performance hurdles (based around Total Shareholder Returns (TSR) and
Distributable Profit Per Share (DPPS)) are met .
The key features of the plan are as follows:
• The rights are granted for nil consideration and have a nil exercise price;
• Rights do not carry any dividend or voting rights prior to vesting;
• Each right that vests entitles the employee to receive one fully paid ordinary share in SPL and SIML.
The shares issued on vesting carry full voting and divided rights; and
• The individual must remain an employee of SIML as at the relevant vesting date for any rights to vest.
Further details of the SIML long term share incentive scheme can be found in note 23 to the
consolidated financial statements on page 68.
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DirectorPositionCompany
Philip Ling
(term as Director commenced on 26 June 2017)
DirectorStride Holdings Limited
(1)
Director/ShareholderSkymark Capital Limited
(1)
Michael Stiassny
Director Stride Holdings Limited
Chairman Vector Limited
Director Ngāti Whātua Ōrākei Whai Rawa Limited
Director Whai Rawa GP Limited
Chairman Tower Limited
Director Tower Financial Services Group Limited
Director Queenstown Airport Corporation Limited
Director Bengadol Corporation Limited
ChairmanNZ Transport Agency
David van Schaardenburg
Director Stride Holdings Limited
DirectorNew Zealand Funds Superannuation Limited
TrusteePetersham Trust
Director Van Schaardenburg Trustee Company Limited
Michelle TierneyDirectorStride Holdings Limited
1
Entries added by notices given by Directors during the year ended 31 March 2018.
2
Entries removed by notices given by Directors during the year ended 31 March 2018.
Directors of Subsidiary Companies
At 31 March 2018, Directors Tim Storey, John Harvey, Philip Ling, Michael Stiassny, David van Schaardenburg and
Michelle Tierney were Directors of Stride Holdings Limited, a wholly owned subsidiary of Stride Property Limited.
No additional fees were paid to the Directors in respect of this role.
Stride Investment Management Limited had no subsidiaries as at 31 March 2018.
Indemnity and Insurance
In accordance with section 162 of the Companies Act and the SIML and SPL Constitutions, each of SIML and SPL has
entered into a deed of access, indemnity and insurance to indemnify its Directors and the Directors of its subsidiaries
for liabilities or costs they may incur for acts or omissions in their capacity as a Director to the extent permitted under
the Companies Act 1993. The indemnity does not cover wilful default or fraud, criminal liability, liability for failure to act
in good faith and best interests of the relevant company, or liabilities that cannot be legally indemnified. SIML and SPL
also have a Directors’ and Officers’ Liability Insurance Policy in place. Among other things, the Directors’ and Officers’
Liability Insurance Policy excludes cover for deliberate dishonesty, insider trading, fines and penalties (except for legally
indemnifiable civil fines or civil penalties), liability arising out of a breach of professional duty other than as a professional
director, and liability for which the insured is legally indemnified.
In authorising any insurance to be effected, each Director signs a certificate stating that, in their opinion, the cost of the
insurance is fair to SIML and SPL.
Disclosures of Interest
The general disclosures of interest made by Directors of the Boards, pursuant to section 140(2) of the Companies Act
1993, are shown in Table 6.
The following declarations of interest were made pursuant to section 140(1) of the Companies Act 1993:
Table 6 – Disclosures of Interest
Director
Nature of the Interest
Tim Storey An interest in the Bunnings Transaction between SPL and Investore Property Limited (Investore) as
Directors of both companies, which related to the disposal of three Bunnings operated properties
at Hamilton, Rotorua and Palmerston North by SPL to Investore for $78.5 million, which was
approved by Investore shareholders on 8 February 2018 and settled on 28 February 2018.
John Harvey
Table 7 – Interests register entries
In accordance with section 211(1)(e) of the Companies Act, particulars of the entries in the Interests Register of the Boards
made during the accounting period are as set out in the table below:
DirectorPositionCompany
Tim Storey
(Chairman)
Director Stride Holdings Limited
Director Diversified NZ Property Fund Limited
Director Investore Property Limited
DirectorReading New Zealand Limited
DirectorReading Properties New Zealand Limited
DirectorReading New Lynn Limited
DirectorReading Dunedin Limited
DirectorFarming New Zealand Limited
DirectorFarming NZ Management Limited
DirectorProlex Limited
DirectorProlex Investments Limited
DirectorProlex Management Limited
Chairman JustKapital Limited
Director JustKapital Litigation (NZ) Partners Limited
John Harvey
DirectorStride Holdings Limited
DirectorInvestore Property Limited
DirectorPort of Otago Limited
(2)
Director/ShareholderPomare Investments Limited
Chairman New Zealand Opera Limited
Director Kathmandu Holdings Limited
Director Heartland Bank Limited
DirectorChalmers Property Limited
(2)
Director Ballance Agri-Nutrients Limited
(2)
Statutory Disclosures
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Substantial Product Holders
*
As at 31 March 2018, the names of all persons who are substantial product holders in SIML and SPL pursuant to sub-part
5 of part 5 of the Financial Markets Conduct Act 2013, are noted below:
Name
Date of substantial
product holder
notice
Relevant interest
in the number
of shares
% of shares
held at date
of notice
Accident Compensation Corporation 22 December 201733,234,315 9.11%
ANZ New Zealand Investments Limited
and related bodies corporate
30 November 201745,106,21912.36%
* The number of ordinary shares listed in the table are as per the last substantial product holder notice filed during the period. As the notice is required to be
filed only if the total holding of a shareholder changes by 1% or more since the last notice filed, the number noted in this table may differ from that shown
in the list of the 20 largest registered shareholders on page 98.
Distribution of Ordinary Shares and Shareholdings as at 31 March 2018
*
Size of the holding
Number of
shareholders
% of
shareholders
Number of
ordinary shares
% of
ordinary shares
**
1 to 499
420.769,1990
500 to 999
340.6124,4070.01
1,000 to 1,999
1753.16265,3540.07
2,000 to 4,999
73313.232,467,6740.68
5,000 to 9,999
1,40425.339,863,6682.70
10,000 to 49,999
2,64047.6455,799,51015.29
50,000 to 99,999
3245.8521,636,1775.93
100,000 to 499,999
1703.0728,415,2057.79
500,000 to 999,999
50.093,208,2780.88
1,000,000 and over
150.27243,299,80566.66
Total
5,542100%364,989,277100%
* Some numbers in the above table may not sum due to rounding.
** Percentage of ordinary shares is rounded to 2 decimals places.
Donations
In accordance with section 211(1)(h) of the Companies Act 1993, SPL made a $5,000 donation in the year ending
31 March 2018. SIML did not make any donations.
SPL is a sponsor of the Graeme Dingle Foundation (GDF) and SIML is a sponsor of the Keystone New Zealand Property
Education Trust. During the year, SPL paid $50,000 to GDF and SIML paid $10,000 to Keystone New Zealand Property
Education Trust by way of sponsorship.
Credit Rating
As at the date of this Annual Report, Stride does not have a credit rating.
Exercise of NZX Disciplinary Powers
The NZX did not exercise any of its powers under Listing Rule 5.4.2 in relation to Stride during FY18.
Auditor’s Fees
As noted, PwC has continued to act as auditor for Stride and the amount payable by Stride and its subsidiaries to
PwC, for audit fees and non-audit work fees undertaken in respect of FY18, are set out in note 6 to the consolidated
financial statements.
Use of Group Information
No notices have been received by the SIML Board or SPL Board under section 145 of the Companies Act with regard to the
use of Stride information received by Directors in their capacities as Directors of Stride or any subsidiary companies of either of
SIML or SPL.
Loans to Directors
There are no loans to Directors.
Disclosures of Directors’ Interests in Share Transactions
In accordance with section 211(1)(e) of the Companies Act, there were no Directors’ interests in share transactions for SPL
and SIML in FY18.
Directors’ Interests in Shares
Directors disclosed the following relevant interests in shares in each of SIML and SPL as at 31 March 2018:
Director
Relevant interest held in shares
Tim Storey 126,552
John Harvey 126,552
Michael Stiassny 255,052
David van Schaardenburg 75,165
Twenty largest registered shareholders as 31 March 2018
*
Name Number of shares% of shares
Accident Compensation Corporation – NZCSD32,702,9598.95
ANZ Wholesale Trans-Tasman Property Securities Fund – NZCSD30,023,6018.22
HSBC Nominees (New Zealand) Limited – NZCSD 21,420,8805.86
BNP Paribas Nominees (NZ) Limited – NZCSD 18,059,4904.94
JBWere (NZ) Nominees Limited16,087,0824.40
National Nominees New Zealand Limited – NZCSD 14,716,3084.03
Citibank Nominees (New Zealand) Limited – NZCSD12,766,5733.49
Forsyth Barr Custodians Limited12,253,0783.35
Tea Custodians Limited Client Property Trust Account – NZCSD9,294,8352.54
ANZ Wholesale Property Securities – NZCSD9,281,2602.54
MFL Mutual Fund Limited – NZCSD8,096,9262.21
FNZ Custodians Limited 8,003,2002.19
Custodial Services Limited 7,762,0602.12
BNP Paribas Nominees (NZ) Limited – NZCSD5,353,3241.46
Custodial Services Limited 4,043,8691.10
Investment Custodial Services Limited 3,905,4201.07
Custodial Services Limited 3,442,1610.94
Mint Nominees Limited – NZCSD3,203,2670.87
PT (Booster Investments) Nominees Limited 3,063,4330.83
New Zealand Depository Nominee Limited
2,899,0700.79
Total
226,378,79662.02%
* Shares held by New Zealand Central Securities Depository Limited (NZCSD) are grouped under a single legal holding as reflected in the spread of equity
security holders in the table. The 20 largest quoted equity securities in the shareholders table shows the beneficial holder of the shares in the NZCSD
register. Some numbers in the above table may not sum due to rounding.
98
Statutory DisclosuresStatutory Disclosures
99
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Listing Rule 9.2
This waiver:
• To the extent that the entry into the Management Agreement is required to be approved by an Ordinary Resolution
of shareholders under Listing Rule 9.2.1, removes the requirement for that approval; and
• Permits SPL and SIML to enter into “Material Transactions” as “Related Parties”, without requiring the approval of
shareholders under Listing Rule 9.2.1 where SPL and SIML are entering into the transaction to acquire or establish
new property investment opportunities or real estate investment management opportunities.
L i s t i n g R u l e 10 .1.1
A ruling that, for the purposes of the Listing Rules in respect of the Stride companies, “Material Information” means
information in respect of the Stride companies that a reasonable person would consider to have a material effect on the
price of the stapled securities of the Stride companies, rather than the SPL shares or SIML shares separately.
Listing Rules 10.3.2 and 10.4.2
This waiver permits the Stride companies to provide the information required in annual and half-year reports on a
consolidated basis, rather than by and in respect of each Stride company individually. This waiver is subject to the
additional condition that each of the Stride companies release individual financial statements to the extent required
by the Financial Markets Conduct Act 2013.
Listing Rule 11.1.5
Approval to certain constitutional provisions of the Stride companies, which provide for the restrictions on transfer of
the stapled securities.
Listing Rule 11.2
This waiver permits the Stride companies to provide consolidated statements of shareholdings to shareholders which
shows their overall Stride holding, rather than their shareholding in each Stride company separately.
Financial Reporting Exemption
The financial statements for each Stride company were prepared in accordance with the Financial Markets Conduct
(Stride Property Group) Exemption Notice 2017. This exemption allows SPL and SIML, subject to conditions set out in
the exemption notice, to prepare financial statements in respect of Stride, while they remain stapled (in place of separate
financial statements for each company).
NZX Waivers
The following waivers from the NZX Main Board Listing Rules were granted and/or relied on by Stride during the
12 months preceding 31 March 2018. A copy of these waivers is available at www.nzx.com/companies/SPG
Listing Rule 1.6.1
A ruling that the Directors do not have a “Disqualifying Relationship” as a consequence of their appointment as Directors of
SIML under the stapled security structure, in order to allow the Independent Directors (as defined under the Listing Rules)
of SIML to also be Independent Directors of SPL.
A waiver from the Listing Rules to the extent necessary to provide that the “Average Market Capitalisation”, where used
in the Listing Rules, refers to the combined “Average Market Capitalisation” of Stride, rather than each of SPL and SIML
separately (there being no quoted price available for each of SPL and SIML).
Listing Rule 1.8.6
A ruling that Investore Property Limited is not an Associated Person of Stride Investment Management Limited as a
consequence of Listing Rule 1.8.5 and therefore Investore Property Limited is not a Related Party of Stride Investment
Management Limited.
Listing Rules 3.3.5 to 3.3.15
This waiver permits:
• The SPL Board and the SIML Board to be made up of the same people;
• An SPL Board member to be deemed to be appointed (or removed) if appointed to (or removed from) the SIML Board; and
• The SPL Board members to retire from the SPL Board by rotation at the same time as they retire from the SIML Board.
Listing Rule 3.4.3
This waiver permits the Directors of one Stride company to vote on matters in which they are “interested” due to being a
Director of the other Stride company. Directors will not be permitted to vote on matters in which they are “interested” by
virtue of a relationship or interest other than their directorship of the Stapled Entities.
Listing Rule 3.5
This waiver permits the pooling of Director remuneration for Stride, and the approval of Director remuneration by way of
single resolution of SIML shareholders.
Listing Rules 6.2 and 6.3
This waiver permits Stride to provide consolidated notices of meetings to shareholders. This will not affect the obligation
for each of SPL and SIML to hold separate meetings (albeit that they will occur one after the other).
Listing Rule 7.3.6
This waiver permits SPL to issue shares to SIML employees under a SIML employee share plan (if any), up to a maximum of
3% of the total number of SIML shares on issue at the beginning of a 12 month period, in order to ensure that the number
of SPL shares on issue is the same as the number of SIML shares on issue at all times.
Listing Rule 7.12
This waiver permits the Stride companies to announce, via NZX, issues, acquisitions, conversions or redemptions of
securities on a consolidated basis. Dividends and compliance with the dividend policy would be separately announced
by each of SPL and SIML. Shareholders should look to the ticker code for Stride (“SPG”) to see announcements relating
to their Stapled Securities. Each of SPL and SIML will provide a separate announcement to the market in respect of its
compliance with its dividend policy.
100
Statutory DisclosuresStatutory Disclosures
101
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018
Implications of Investing in Stapled Securities
The practical impacts of a shareholder holding a stapled security include that:
• The shareholder is a shareholder of both SPL and SIML;
• In order to sell a SPL share or a SIML share, the corresponding SIML share or SPL share, as applicable, also needs
to be sold to the same purchaser;
• Market disclosures via NZX may be made in respect of the Stride companies as a whole, but each of SPL and SIML will
continue to be obliged to make announcements under the NZX Listing Rules according to the nature of the disclosure
(for example, announcements about the declaration of a dividend or the passing of a resolution at a meeting of
shareholders would be made by the relevant company);
• The only quoted price of a SPL share and/or a SIML share on the NZX Main Board will be the quoted price for the
stapled security;
• The materiality of “Material Information” for continuous disclosure purposes under the Listing Rules will be assessed
against the potential effect on the price of stapled securities as there will not be a separate quoted price available for
each of SPL and SIML. Any disclosure of “Material Information” made by Stride will explain whether the information is
material to SPL and/or SIML;
• New stapled security issues will result in equal numbers of SPL shares and SIML shares being issued;
• Shareholders are entitled to attend, or vote by proxy, at separate meetings of shareholders of each of SPL and SIML.
For some transactions involving both Stride companies (for example, an issuance of stapled securities being made with
shareholder approval under the Listing Rules), resolutions might be required from shareholders in respect of the same
matter. In that case, the relevant transaction will only be able to proceed if the respective resolutions are approved at
shareholder meetings of SPL and SIML; and
• Distributions will be received, to the extent declared, from each of SPL and SIML.
Directors’ Statement
This Annual Report is dated 30 May 2018 and is signed for and on behalf of the Boards of Directors of Stride Property
Limited and Stride Investment Management Limited by:
TIM STOREY
Chairman
JOHN HARVEY
Chair of the Audit and Risk Committee
Acknowledgement: Photos of 15 Rockridge Avenue, Auckland by ANDREW FORD
Board of Directors
Tim Storey (Chairman)
John Harvey
Philip Ling
Michael Stiassny
David van Schaardenburg
Michelle Tierney
Registered Office
Level 12, 34 Shortland Street
Auckland 1010
PO Box 6320
Wellesley Street
Auckland 1141
New Zealand
T + 64 9 912 2690
W strideproperty.co.nz
Share Registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna
Private Bag 92119
Victoria Street West
Auckland 1142
T + 64 9 488 8777
E stride@computershare.co.nz
Auditor
PricewaterhouseCoopers
PricewaterhouseCoopers Tower
188 Quay Street
Private Bag 92162
Auckland 1142
Legal Adviser
Bell Gully
Level 21, Vero Centre
48 Shortland Street
PO Box 4199
Auckland 1140
Bankers
ANZ Bank New Zealand Limited
Bank of New Zealand
Commonwealth Bank of Australia
Westpac New Zealand Limited
Corporate Directory
102
Statutory Disclosures
103
Stride Property Group | Annual Report 2018Stride Property Group | Annual Report 2018Corporate Directory
MAY
AUG
NOV
FEB
2018
2019
FY18 ANNUAL RESULTS
FY18 ANNUAL REPORT RELEASED
FY18 Q4 DIVIDEND ANNOUNCEMENT
FY19 HALF YEAR RESULTS ANNOUNCEMENT
FY19 Q2 DIVIDEND ANNOUNCEMENT
FY19 Q1 DIVIDEND ANNOUNCEMENT
30 AUGUST — ANNUAL SHAREHOLDER MEETINGS
FY19 Q3 DIVIDEND ANNOUNCEMENT
FY19 Corporate Calendar for Stride
104
Stride Property Group | Annual Report 2018
Stride Property Group
Level 12 , 34 Shortland Street
Auckland 1010
PO Box 6320
Wellesley Street
Auckland 1141, New Zealand
T + 64 9 912 2690
W strideproperty.co.nz
---
Stride Property Group (NS)
Annual Results
For the year ended
31 March 2018
30 May 2018
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Page
Welcome
Highlights
3
Philip Littlewood –Chief Executive Officer
Strategy
5
Financial Performance10
Jennifer Whooley –Chief Financial Officer
Capital Management15
Portfolio Overview18
Philip Littlewood –Chief Executive Officer
REIM Business23
Conclusion26
Appendices28
2
Agenda and Contents
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Highlights
3
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Financial Performance
•Net rental income of $57.6m ($58.2m)
•Management fee income of $21.0m ($18.8m) (incl SPL fees)
•Corporate expenses of $13.8m ($13.1m)
•Profit before other income and income tax of $40.7m ($41.3m)
•Profit after income tax of $95.3m ($35.7m)
•Distributable profit
1
after current income tax of $38.8m or 10.63cps ($38.1m or 10.44cps)
•Combined 9.91cps cash dividend for Stride Property Group (Stride) for FY18
•Dividend Reinvestment Plan remains suspended
1.Distributable profit is a non-GAAP financial measure adopted by Stride Property Group (Stride) to assist Stride and investors inassessing Stride’s profit available for distribution. It is defined as net profit/(loss) before income
tax, adjusted for non-recurring and/or non-cash items, share of profits in associates, dividends received from associates and current tax. Further information, including the calculation of distributable profit and the
adjustments to net profit before income tax, is set out in note 8 of the consolidated financial statements for the year ended31March 2018.
4
Highlights
On 10 June 2016, Stride Property Limited (SPL) issued an
Explanatory Memorandum as a part of its restructuring into
a stapled group. The following is a comparison of the
prospective financial information in the Explanatory
Memorandum to Stride Property Group’s actual results for
the year ended 31 March 2018 (FY18)
4
Distributable profit
1
after current
income tax of 10.63 cps, up
Profit after income tax of $95.3m, up
Management fees income
(incl SPL fees) of $21.0m, up
on forecast
on forecast
on forecast
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Vision
To be the best performing listed
real estate investment and
management company in
New Zealand
Strategy
Stride is developing a real estate
investment management (REIM)
business for the long term, with each
step towards growth deliberate and
carefully considered
We use our expertise to invest in and
manage quality real estate portfolios
that attract the highest demand and
deliver market-leading returns to our
investors
We believe that by creating value for
our investors we will continue to
create sustainable growth
opportunities for Stride’s
shareholders
Strategy
Strategic pillars
5
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
1.Investment property portfolio valuation increase excludes $0.8m arising from the elimination of the development fees charged by SIML to SPL and includes $9.5m fair value uplift from the restructure of the Bunnings
leases. The investment property portfolio excludes the valuation of NorthWest Two, which is classified as inventory in the financial statements. As at 31 March 2017, the investment property portfolio was valued at
$859m.
2.The LVR calculation includes the value of inventory of $36.3m in the value of properties and ignores the value of the investments in the managed funds.
Our commitment
•We target investments that show high, long-term demand
with consistently strong returns
•We will continue to grow our high performing and
sustainable investment management business
Our delivery
•Net 5.6% investment property portfolio valuation increase¹, taking SPL’s
loan to value ratio (LVR) to 34.1%
2
•Net Tangible Assets (NTA) backing per share to $1.82 (excludes value of
management contracts)
•Profit after income tax of $95.3m ($35.7m), up $59.6m
•Distributable profit after current income tax of $38.8m or 10.63cps
($38.1m or 10.44cps) up $0.7m or 0.19cps
•Management fee income grown to $21.0m, including SPL fees, ($18.8m),
compared with $13.1m for FY17
Deliveryof Strategy
Net property
valuation
increase
1
Profit after
income tax
NTA
per share
Management
fee income
(incl SPL fees)
6
(Compared to Prospective Financial Information for FY18 figures in brackets)
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Our commitment
We are committed to building our capability to deliver a full range
of services from asset management to property development,
from finance to corporate services and investment management
Our delivery
•Appointment of new Chief Executive Officer –Philip Littlewood
•Appointment of new Director –Philip Ling
•Newly established Development team, led by Mark Luker, with overall
responsibility for property development across all property sectors
•Newly established Corporate Services team, led by Louise Hill, with responsibility
for governance, compliance, risk, health and safety and in-house legal
Delivery of Strategy
Development team
Led by Mark Luker
Corporate Services teamLed by Louise Hill
7
Appointment of new
Chief Executive Officer
Philip Littlewood
Appointment of new
Director Philip Ling
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
1.Contract Rental is the amount of rent payable by each tenant, plus other amounts payable to SPL by that tenant under the terms of the relevant lease as at 31 March 2018,
annualised for the 12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
2.Total retail sales is the annual sales on a rolling 12-month basis (excluding GST).
3.Like-for-like specialty sales only includes sales from those tenancies who have traded for the past 24 months and includes commercial services categories.
4.Sales data is not collected for all tenants at Silverdale Shopping Centre. Some tenants are not obliged to provide sales dataunder the terms of their lease.
Our commitment
We leverage our investment management, development and leasing expertise
to select property investments that deliver market leading returns
Our delivery
•Divestments -three Bunnings operated properties sold to Investore Property Limited for $78.5m, following a lease
restructure, equating to a $9.5m fair value uplift on 31 March 2017 values, including associated costs and incentives
•Developments
•15 Rockridge Ave, Auckland -9,000m
2
new warehouse completed at a yield on cost of 7.1% (including land)
•11 Springs Road, Auckland -New $43m facility with 25-year lease to Waste Management at an initial net rental of
$3.9m pa. Possible expansion of scope of works by up to $23m with associated increase in rental. Completion targeted
for second half of 2019 calendar year
•Leasing
•282 lease transactions over 267,320m
2
for a total annual rental of $54.8m , taking FY19 lease expiries to 8.7%
and FY20 lease expiries to 10.1% of the portfolio contract rental
1
•Occupancy at 96.7% (96.8%). Subsequent to balance date, portfolio occupancy increased to 98.8%
•Weighted average lease term of 5.1 years (4.9 years)
•Retail Sales -total sales at NorthWest Shopping Centre and NorthWest Two increased by +14.4%
2
, with specialty sales
3
alone increasing by +13.5% to $8,075 pm
2
. Total sales
4
at Silverdale Centre increased by +4.4%
Delivery of Strategy
(Prior period FY17 for SPL figures in brackets)
8
15 Rockridge Avenue, Auckland
11 Springs Road, Auckland
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Our commitment
•We create and manage sustainable, single sector focused investment
products for our investors
•We co-invest in our products to ensure we have a long-term alignment with our investors
•Our success is aligned to the success of our products
•Net rental income of $44.5m, up $0.6m on
forecast
2
•Profit after income tax $46.2m, up $27.0m on
forecast
2
•$100m six year Bond issued at 4.40% in April
2018
•Disposed of two assets for $32.6m, 11% premium
to book value
•39 leasing transactions completed reflecting an
increase of +2.7% over previous rentals
Delivery of Strategy
Our delivery
•Successful delivery of H&M development
at Queensgate, on time and on budget
•Significant development pipeline, including
Queensgate rebuild
•335 leasing transactions completed
reflecting an increase of +13.0%
over previous rentals
Portfolio composition by value
1
9
1.Includes NorthWest Two, Auckland, which is classified as inventory in the consolidated financial statements.
2.Values above are calculated based on the audited numbers in the financial statements for 2018 and the forecast numbers containedin the Product Disclosure Statement issued by Investore Property Limited (Investore) on 10 June 2016
and associated information published on the online register maintained by the Companies Office and the Registrar of FinancialService Providers on 10 June 2016 in connection with Investore’s initial public offering.
Portfolio valuation –owned and managed properties
as at 31 March 2018
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
10
Financial Performance
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
2018
Actual
$m
2018
Prospective
Base Case
$m
Change
$m%
Net rental income
57.658.2(0.6)(0.9)
Management fee income13.312.9+0.4+3.0
Corporate expenses (13.8)(13.1)(0.7)(5.3)
Profit before net finance expenses, other income and income tax57.157.9(0.9)(1.5)
Net finance expenses(16.3)(16.6)+0.3+1.8
Profit before other income and income tax (refer Appendix 2)
40.7
41.3(0.6)(1.4)
Other income
1
60.15.0+55.1+1,110.7
Profit before income tax
100.8
46.3+54.5+117.9
Income tax expense(5.5)(10.6)+5.0+47.7
Profit after income tax attributable to shareholders
95.335.7
+59.6+167.0
On 10 June 2016, SPL issued an Explanatory Memorandum for the purposes of a special meeting of shareholders. The table above andthe tables on pages 12-13 are a comparison of the prospective financial information in the Explanatory
Memorandum to Stride Property Group’s actual results for the year ended 31 March 2018.
1.Actual 31 March 2018, other income includes net change in fair value of investment properties of $48.3m. Prospective Financial Statements, other income includes net change in fair value of investment properties of $1.1m.
11
Financial Performance
Values in the table above are calculated based on the numbers in the financial statements for each respective financial year andmay not sum accurately due to rounding.
Stride Property Group -Consolidated
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
2018
Actual
$m
2018
Prospective
Base Case
$m
Change
$m%
Profit before income tax
100.846.3+54.5+117.9
Non-recurring and non-cash adjustments:
-Net change in fair value of investment properties(48.3)(1.1)(47.2)(4,129.3)
-Share of profit in associates(9.4)(3.8)(5.6)(147.2)
-Dividend income from associates4.33.9+0.4+9.8
-Net rent free incentives(0.1)0.2(0.3)(132.6)
-Net lease contribution incentives0.50.5-(6.8)
-Spreading of fixed rental income amortisation-0.5(0.5)(102.2)
-Share based payment expense0.50.6(0.1)(16.6)
-Depreciation and amortisation expense0.30.20.165.8
-Refinancing cost amortisation0.10.1--
-Fee income 1.2-1.2100.0
-Other income –insurance recoveries(1.6)-(1.6)(100.0)
Distributable profit before current income tax48.447.4+1.0+2.1
Current tax expense(9.6)(9.3)(0.3)(3.2)
Distributable profit after current income tax
38.8
38.1+0.7+1.9
Basic distributable profit after current income tax per share -weighted
10.63cps
10.44cps
Weighted average number of shares (million)
365.0
364.
1.Distributable profit is a non-GAAP financial measure adopted by Stride to assist Stride and investors in assessing Stride’s profit available for distribution. It is defined as net profit/(loss) before income tax, adjusted for non-
recurring and/or non-cash items, share of profits in associates, dividends received from associates and current tax. Further information, including the calculation of distributable profit and the adjustments to net profit before
income tax, is set out in note 8 of the financial statements for the year ended 31 March 2018.
12
Distributable Profit
1
Stride Property Group -Consolidated
Values in the table above are calculated based on the numbers in the financial statements and Prospective Financial Statements and may not sum accurately due to rounding.
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
2018
Actual
$m
2018
Prospective
Base Case
$m
Change
$m%
Distributable profit after current income tax38.838.1+0.7+1.9
Adjustments to funds from operations:
-Maintenance capital expenditure
(5.5)
(4.0)(1.5)(36.5)
Adjusted Funds From Operations (AFFO)33.334.0(0.8)(2.2)
AFFO basic distributable profit after current income tax per share -weighted
9.12cps
9.33cps
Values in the table above are calculated based on the numbers in the financial statements and Prospective Financial Statements and may not sum accurately due to rounding.
13
AFFO Distributable Profit
Stride Property Group -Consolidated
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
As at
31 Mar 18
As at
31 Mar 17
Property value
1
($m)
902.2895.3
Bank debt drawn ($m)307.7347.5
Bank loan to value ratio
2
(LVR)34.1%38.8%
Equity ($m)667.1607.9
Shares on issue (million)365.0364.9
NTA per share (refer Appendix 2)$1.82$1.67
Adjusted NTA per share
3
$1.84$1.68
1.Includes NorthWest Two, Auckland, which is classified as inventory in the financial statements.
2.The LVR calculation includes the value of inventory of $36.3m in the value of properties and ignores the value of the investments in the managed funds.
3.Excludes the after tax fair value of interest rate derivatives.
14
Financial Summary
Stride Property Group -Consolidated
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
15
Capital Management
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
16
KeyTr a n s a c t i o n s:
•
Lease incentive
-$18m paid to Bunnings ($13m net of tax)
•
Disposals
-Three Bunnings operated properties to Investore for $78.5m
(pre disposal costs)
1.The LVR calculation includes the value of inventory of $36.3m in the value of properties and ignores the value of the investments in the managed funds.
2.The Weighted Average Lease Term in a property or portfolio, assuming it is fully leased. This is weighted by the income applicable to each lease and a current market rental with nil term for vacant space.
Debt facilities
As at
31 Mar18
As at
31 Mar17
Bank facility limit
(ANZ, BNZ, CBA, Westpac)
$400m
$400m
Bank debt drawn
$308m
$348m
Weighted maturity of facility
2.2 years
3.2 years
Debt covenants
LVR (Bank Debt / Property Values
1
)
Covenant: ≤ 50%
34.1%
38.8%
ICR (EBIT / Interest and Financing Costs)
Covenant: ≤ 1.75 x
3.1x
2.9x
Weighted Average Lease Term
2
Covenant: > 3.0 years
4.9 years
4.8 years
$200m
$200m
-
$40m
$80m
$120m
$160m
$200m
$240m
Capital Management –Debt Facilities
Stride Property Limited
Debt maturity profile
•
Bank Facility:
•$92m of banking facility headroom as at 31 March 2018
•Bank debt refinancing is planned to occur during FY19
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
CapitalManagement –Cost of Debt
Stride Property Limited
17
KeyTr a n s a c t i o n s:
•
Expired hedging
-$85m swaps, with rates ranging from 3.3% -5.0%
•
Post balance date
•$100m of swaps terminated, with average 2.8 years duration and an
average rate of 4.1%, for a cost of $4.0m
•New $120m swaps entered into with average 5.2 years duration and an
average rate of 2.8%
1.Due to the material change to Stride’s hedging profile post balance date, the above chart has been updated to illustrate Stride’s revised interest rate hedging profile from 30 April 2018 onwards.
Cost of debt
As at
31 Mar 18
As at
31 Mar17
Weighted average cost of debt
(incl. margins & line fees)
5.04%
4.85%
Weighted average interest rate on
current swaps (excl. margins & line fees)
3.84%
3.96%
Weighted average hedging duration
(incl. forward starting swaps)
2.7 years
2.7 years
% of drawn debt hedged
83%
75%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
-
$50m
$100m
$150m
$200m
$250m
$300m
31-Mar-1831-Mar-1931-Mar-2031-Mar-2131-Mar-2231-Mar-23
Notional value of active swaps
Notional value of active swaps as at 30 April
2018
Weighted average interest rate on active swaps
(excl. margin and line fees)
Weighted average as at 30 April 2018
Hedging profile
1
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
18
Portfolio Overview
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Overview
As at
31 Mar 18
As at
31 Mar 17
Properties (no.)
26
29
Tenants (no.)
379
380
Net Lettable Area (m
2
)
251,953
304,714
WALT (years)
5.1
4.9
Occupancy Rate (by area)
96.7%
96.8%
Portfolio Valuation
3
($m)
902.2
895.3m
1.Contract Rental is the amount of rent payable by each tenant, plus other amounts payable to SPL by that tenant under the terms of the relevant lease as at 31 March 2018, annualised for
the 12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
2.Represents the scheduled expiry for each lease, excluding any rights of renewal that may be granted under each lease, for theentire portfolio as at 31 March 2018, as a percentage of Contract Rental.
3.Includes NorthWest Two, Auckland, which is classified as inventory in the financial statements.
19
Portfolio Summary
Lease expiry profile
2
by Contract Rental
1
Portfolio location —by Contract Rental
1
Stride Property Limited
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
TenantProperty
Lease
Commencement
Area (m
2
)
Term
(years)
Annual
Contract
Rental
1
($000)
Tasman Liquor Company22 Ha Crescent, AucklandJuly 20188,757 3795
Checkpoint NZ15 Rockridge Avenue, AucklandAugust 20183,505 10505
Bed Bath & Beyond61 Silverdale Street, AucklandMay 2018
2
684 6283
AMP Capital Investors 33 Customhouse Quay, WellingtonMay 2018782 8375
New Zealand Post15 Ride Way, AucklandSeptember 20176,027 6644
Westpac (NZ) Investments1 Grey Street, WellingtonMay 20181,096 9322
3
National Glass8 Reg Savory Place, AucklandSeptember 20174,025 6490
Meridian33 Customhouse Quay, WellingtonSeptember 20192,933 121,301
Jacobs New Zealand1 Grey Street, WellingtonAugust 20181,584 7578
20
SIMLcompleted282leasetransactionsforSPLduringFY18:
•217rentreviewsover178,276m
2
foratotalannualrentalof$39.8m;
•33leaserenewalsover27,172m
2
foratotalannualrentalof$4.9m;and
•32newlettingscompletedover61,872m
2
foratotalannualrentalof$10.2m.
2
0
1.Contract Rental is the amount of rent payable by each tenant, plus other amounts payable to SPL by that tenant under the terms of the relevant lease as at 31 March 2018, annualised for
the 12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
2.Subject to completion of landlord works.
3.Rental still subject to review.
Major Lease Transactions Completed
Stride Property Limited
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
21
Asat31March2018,8.68%ofContractRental
1
expiriesremaininFY19(8.72%asat31March2017).
FY20
Property
Tenant
Net Lettable
Area (m
2
)
% of
Contract
Rental
1
30 Airpark Drive, AucklandDHL13,733 2.18
80 Greys Avenue, AucklandDDB NZ3,653 1.77
Johnsonville Shopping Centre (50%), WellingtonVarious1,972 1.04
25 O'Rorke Road, AucklandAA Insurance 1,716 0.42
33 Customhouse Quay, WellingtonWagamama320 0.36
Balance6,837 4.29
Total28,231 10.05
Asat31March2018,10.05%ofContractRental
1
expiriesremaininFY20(17.48%asat31March2017).
FY19
Property
Tenant
Net Lettable
Area (m
2
)
% of
Contract
Rental
1
Johnsonville Shopping Centre (50%), WellingtonVarious3,163 1.72
1 Grey Street, WellingtonWestpac (NZ) Investments1,586 0.97
7-9 Fanshawe Street, AucklandIAG667 0.43
460 Rosebank Road, AucklandDHL2,617 0.34
Silverdale Shopping Centre, AucklandNorth Beach629 0.32
Balance8,7394.90
Total17,403 8.68
Totals may not sum accurately due to rounding.
1.Contract Rental is the amount of rent payable by each tenant, plus other amounts payable to SPL by that tenant under the terms of the relevant lease as at 31 March 2018, annualised for
the 12 month period on the basis of the occupancy level for the relevant property as at 31 March 2018, and assuming no default by the tenant.
Remaining Lease Expiries FY19 & FY20
Stride Property Limited
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Property
Occupancy (%)
31 Mar 18
Vacancy (m
2
)
31 Mar 18
Total Area (m
2
)
31 Mar 18
Occupancy (%)
31 Mar 17
21-25 Teed Street, Auckland97.986 4,090 97.9
22 The Terrace, Wellington100.0-4,781 100.0
Other100.0-39,766 100.0
Office Total99.886 48,637 99.8
460 Rosebank Road, Auckland100.0-12,265 45.8
15 Rockridge Avenue, Auckland39.05,486 8,991 n/a
Other100.0-79,595 100.0
Industrial Total94.65,486 100,852 94.1
Corner Mt Wellington Highway & Penrose Road, Auckland97.1259 9,011 96.7
Johnsonville Shopping Centre (50%), Wellington90.3675 6,924 96.1
61 Silverdale Street, Auckland98.9244 22,951 99.1
65 Chapel Street, Tauranga100.0-16,592 100.0
NorthWest Shopping Centre, Auckland96.21,040 27,465 99.2
NorthWest Two, Auckland92.0636 7,920 73.0
Retail Total96.92,854 90,864 96.6
Large Format Retail Total100.0-11,601 100.0
Total96.78,426 251,953 96.8
22
Totals in the table above may not sum accurately due to rounding.
Post balance date, remaining vacancy at 15 Rockridge Avenue, Auckland, was leased increasing portfolio occupancy to 98.8%
Portfolio Occupancy 96.7% (by area)
Stride Property Limited
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
23
REIM Business
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
24
1.Independent valuations as at 31 March 2018.
2.Includes NorthWest Two, Auckland, which is classified as inventory in the financial statements.
3.Includes Johnsonville Shopping Centre, Wellington, which is owned 50/50 by SPL and Diversified NZ Property Trust.
Portfolio Valuation:
Owned and Managed Properties
Value of
Investment
Properties
1
Number of
Investment
Properties
Investment in
Managed
Entities
$902m
2
26
3
–
$738m40
19.9%
held by SPL
$538m4
3
2.0%
held by SPL
To t a l
$2,178m69
3
–
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
1.Independent valuations as at 31 March 2018.
25
REIM Fee Income
Managed Portfolios —composition by value
1
Real estate investment management
fee income ($m)
Investor alignment
The performance of Stride’s
investment management business is
highly aligned with the investors in
each of SIML’s managed products.
The performance of Stride’s
investment management business is
derived from three main sources:
•Underlying performance of the
managed products, including return
on investment from SPL holding in
each product, and performance
fees
•Activity based SIML fee revenue
income, primarily driven from
capital and leasing activity
•Base fee revenue, aligned to the
size of the underlying business
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
26
Conclusion
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
Looking ahead
•Stride has made a strong start in its first two years of operations
•Over time, seeking to establish a group of sector-specific commercial property products, with
Stride co-investing
•Over the short to medium term, Stride will look to use its balance sheet to acquire assets that may
ultimately be used in the establishment of these products
•Targeting a combined 9.91cps cash dividend for Stride Property Group for FY19
Ta r g e t i n g a c o m b i n e d c a s h d i v i d e n d f o r
Stride Property Group for FY19 of
REIM platform
established
27
Execution of strategy
•Significant steps have been taken around Stride’s four strategic pillars of Performance, People,
Places and Products
•REIM platform well established
•Outperformance of distributable profit after current income tax of $38.8m or 10.63cps ($38.1m
or 10.44cps)
•Combined 9.91cps cash dividend for Stride Property Group for FY18
Execution of strategy
across four ‘P’s
Performance, People, Places, Product
Conclusion
(Compared to Prospective Financial Information for FY18 figures in brackets)
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
28
Appendices
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
29
29
1.Revaluation movement includes capital expenditure, capitalised
lease incentives and fixed rental income. It excludes $0.8m
arising from the elimination of the development fees charged
by SIML to SPL.
2.Total revaluation movement calculation excludes the value of
NorthWest Two, which is classified as inventory in the financial
statements. As at 31 March 2017, the portfolio was valued at
$895.3m.
3.Totals in the table may not sum accurately due to rounding.
4.This calculation excludes land and development.
Stride Property Limited
31 Mar 18
Valuation
Revaluation
Movement
1
Revaluation
Movement
1
Market Cap
Rate 2018
Market Cap
Rate 2017
AddressCity$m%$m%%
33 Corinthian DriveAuckland47.41.2 0.5 6.30 6.30
7 -9 Fanshawe StreetAuckland9.8(20.3) (1.9) 10.25 10.50
80 Greys Avenue Auckland19.7(1.5) (0.3) 7.00 7.13
21 -25 Teed StreetAuckland21.72.1 0.4 7.00 6.88
35 Teed StreetAuckland21.13.5 0.7 6.25 6.50
33 Customhouse QuayWellington33.91.7 0.5 6.75 7.25
1 Grey StreetWellington52.86.0 3.0 7.50 7.75
22 The TerraceWellington17.38.9 1.4 7.88 8.25
OFFICE TOTAL 223.62.0 4.4 7.07 7.26
30 Airpark DriveAuckland22.63.5 0.8 6.63 6.75
22 Ha CrescentAuckland13.628.0 3.0 6.13 6.65
8 Reg Savory PlaceAuckland7.716.6 1.1 6.00 6.63
20 Rockridge AvenueAuckland14.74.2 0.6 6.63 6.75
460 Rosebank RoadAuckland16.13.8 0.6 6.88 7.50
25 O'Rorke RoadAuckland64.09.6 5.9 5.88 6.09
415 East Tamaki RoadAuckland17.12.0 0.3 6.38 6.38
15 Ride WayAuckland11.212.7 1.3 5.75 6.25
34 Airpark DriveAuckland7.26.9 0.5 4.88 5.00
15 Rockridge AvenueAuckland21.5167.9 4.2 5.63 n/a
INDUSTRIAL TOTAL 195.711.0 18.2 6.10 6.41
Cnr Mt Wellington Highway & Penrose RoadAuckland36.3(3.0) (1.1) 6.75 6.75
Johnsonville Retail Wellington30.70.2 0.1 7.75 7.05
Silverdale Retail CentreAuckland98.49.3 8.4 6.50 6.75
65 Chapel StreetTauranga41.51.8 0.7 7.63 7.63
NorthWest Shopping CentreAuckland176.00.5 0.9 6.38 6.38
NorthWest TwoAuckland36.3n/a n/a n/a n/a
RETAIL TOTAL419.12.4 9.1 6.69 6.70
2 Carr RoadAuckland42.815.5 5.7 5.13 5.50
BULK RETAIL TOTAL 42.815.5 5.7 5.13 5.50
11 Springs RoadAuckland21.16.0 1.2 n/a7.75
LAND/DEVELOPMENT TOTAL21.16.0 1.2 n/a7.75
TOTAL PORTFOLIO (as at 31 March 2018)
902.24.8
2
38.6
2
6.57
4
6.76
Bunnings portfolio six month revaluation movementn/a0.50.3 n/an/a
Fair value uplift from restructure of Bunnings leasesn/a18.69.5 n/an/a
TOTAL PORTFOLIO (incl disposals during the year)
5.6
2
48.3
2
Appendix 1
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
30
30
($1.8m)
($0.4m)
$0.1m
$3.5m
$34.1m
$4.7m
$0.5m
Year ending
31 Mar 2017
Net rental
loss from
divestments
Net rental increase
from existing portfolio
Increase in
management fee
income
Lower net finance
expense
Higher
corporate expenses
One-off
project costs
incurred FY17
Year ending
31 Mar 2018
Profit before Other Income and Income Tax
$40.7m
Appendix 2
$62.6m
$56.7m
($4.6m)
$1.6m
($0.9m)
$1.0m
$0.5m
($2.1m)
$0.2m
($1.3m)
($0.3m)
40
45
50
55
60
65
As at
31 Mar 2017
DisposalsNew leases
and renewals
ExpiriesRent reviewsDevelopment
completion
Transfer to
development
Casual
leasing
Non-recoverable
ground rental
Other non-
recoverable opex
As at
31 Mar 2018
Net Contract Rental
Stride Property Group —Annual Results Presentation for the year ended 31 March 2018
31
31
$48.3m
$866.0m
$18.0m
($78.4m)
$859.0m
$18.6m
$0.5m
As at
31 Mar 2017
Lease restructure
expenditure
DisposalsCapital expenditure,
lease incentives
& fixed rental
income amortisation
Transfers from
work in progress
Net change
in fair value
As at
31 Mar 2018
Investment Properties (excludes the value of inventory of $36.3m)
$0.01
$1.82
$0.11
$0.13
$1.67
($0.02)
($0.10)
$0.02
As at
31 Mar 2017
Operating profit
before tax
Net change in fair
value of investment
properties
Income tax expenseDividends paidShare of profit in
associate
Other income -
insurance recoveries
As at
31 Mar 2018
NTA per share
Appendix 2 (continued)
Important Notice:
The information in this presentation is an
overview and does not contain all information necessary to make an
investment decision.It is intended to constitute a summary of
certain information relating to the performance of Stride Property
Group for the year ended 31 March 2018. Please refer to Stride
Property Group’s Annual Report 2018 for further information in
relation to the year ended 31 March 2018. The information in this
presentation does not purport to be a complete description of
Stride Property Group. In making an investment decision, investors
must rely on their own examination of Stride Property Group,
including the merits and risks involved. Investors should consult with
their own legal, tax, business and/or financial advisors in connection
with any acquisition of securities.
No representation or warranty, express or implied, is made as to the
accuracy, adequacy or reliability of any statements, estimates or
opinions or other information contained in this presentation, any of
which may change without notice. To the maximum extent permitted
by law, each of Stride Property Limited, Stride Investment
Management Limited (together, the Stride Property Group) and their
respective directors, officers, employees, agents and advisers
disclaim all liability and responsibility (including without limitation
any liability arising from fault or negligence on the part of Stride
Property Group, its directors, officers, employees and agents) for
any direct or indirect loss or damage which may be suffered by any
recipient through use of or reliance on anything contained in, or
omitted from, this presentation.
This presentation is not a product disclosure statement or other
disclosure document.
Level 12, 34 Shortland Street
Auckland 1010, New Zealand
PO Box 6320, Wellesley Street
Auckland 1141, New Zealand
P+64 9 912 2690
Wstrideproperty.co.nz
Thank you
---
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Notice DateAllotment Date
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conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
Commence Quoting New Securities:Security Code:
Cease Quoting Old Security 5pm:
14 June 201821 June 2018
$
$NZ$0.001347
$7,305,936
Date Payable
21 June 2018
In dollars and cents
Retained Earnings
$0.007632
$0.012368
$$0.002968
Ordinary Shares of Stride Property LimitedNZSPGE0001S2
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e.g. Directors' resolution
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numbernumber
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Nature of event
BonusIf ticked,
Rights Issue
Tick as appropriate
Issue
state whether:Taxable
/ Non TaxableConversionInterestRenouncable
Rights IssueCapitalCallDividend
If ticked, stateFull
non-renouncable
change
x
whether:
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x
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EXISTING securities affected by this
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Description of theISIN
class of securities
If unknown, contact NZX
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Description of theISIN
class of securities
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Treatment of Fractions
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Tick if
provide an
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Strike price per security for any issue in lieu or date
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Source of
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Currencydividendin dollars and cents
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NZSX Listing Rule 7.12.7
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TaxationAmount per Security in Dollars and cents to six decimal places
In the case of a taxable bonusResident
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issue state strike priceWithholding Tax(Give details)
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(Refer Appendix 8 in the NZSX Listing Rules)
Record Date 5pmApplication Date
For calculation of entitlements -Also, Call Payable, Dividend /
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of applications this must be the
last business day of the week.
Notice DateAllotment Date
Entitlement letters, call notices,For the issue of new securities.
conversion notices mailedMust be within 5 business days
of application closing date.
OFFICE USE ONLY
Ex Date:
Commence Quoting Rights:Security Code:
Cease Quoting Rights 5pm:
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Cease Quoting Old Security 5pm:
14 June 201821 June 2018
$
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$1,716,895
Date Payable
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Stride Property Limited
Stride Investment Management Limited
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