STR - Stride Property [ex DNZ Property]

[Bev73]

I could be wrong but my understanding is that personal tax rates are 10.5% to $14,000. 17.5% $14k to $48,000 and 30% $48,001 to $70,000.

If your income is above $48,000 then every dollar of income above $48,000 is taxed at 30% or more. Portfolio Listed Entities(PLE) can only attach imputation credits up to 28% of the dividend. I am unsure how it could be beneficial to declare PLE dividends if your income is over $48,000 including PLE dividends, as your tax rate is 30% and the imputation credits are 28% you would need to (unnecessarily) pay the 2% difference.

I would be interested to know how you apply it.

Hi Aaron, I struggled to understand the available info. I eventually relied on the following -
"What makes listed PIEs different to multi-rate PIEs?
Unlike distributions from multi-rate PIEs, dividends paid by listed PIEs are taxable, and are not taxed at your PIR. Listed PIE dividends often include tax credits such as imputation credits, which are calculated based on a 28% tax rate. So even though you don’t need to include listed PIE dividends in your tax return, if your tax rate is less than 28% you can choose to report this income on your tax return in order to claim the excess tax credits."


https://investnow.co.nz/pies-pie-tax-questions-answered/



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[Aaron]

Hi Aaron, I struggled to understand the available info. I eventually relied on the following -
"What makes listed PIEs different to multi-rate PIEs?
Unlike distributions from multi-rate PIEs, dividends paid by listed PIEs are taxable, and are not taxed at your PIR. Listed PIE dividends often include tax credits such as imputation credits, which are calculated based on a 28% tax rate. So even though you don’t need to include listed PIE dividends in your tax return, if your tax rate is less than 28% you can choose to report this income on your tax return in order to claim the excess tax credits."


https://investnow.co.nz/pies-pie-tax-questions-answered/



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If your income is over $48,000 you might want to try calculating with and without the PLE dividends before filing your tax return this year. Or if more than 50% of the PLE dividend will be tax at 30%.

[Bev73]

Hi Aaron, I have checked last year's IR3s. My interpretation may have been incorrect.

Excluding PIE Fund income, the other income, including PIE listed co. dividends, did not breach the $48,000 threshold.

Back to the drawing board.

[Snoopy]

The Meridian building, on the Wellington waterfront, owned by Stride, has been 'destaffed'.

https://www.rnz.co.nz/news/business/466049/hospitality-businesses-worry-about-future-after-wellington-building-vacated-over-quake-risk

A reminder, if one was needed, that a building built to 100% of the earthquake code is designed to save people, not necessarily itself. Meridian have told all of their 180 staff to work from home. Good to see a corporate being pro-active on looking after their staff. Meanwhile the serfs operating the food businesses on the ground floor will 'tough it out'.

"Stride is currently assessing remediation options for the property and intends to provide an update later in the year when the seismic assessment has been completed."

SNOOPY

[winner69]

second newish building to be vacated this week due to seismic problems

Wellington is doomed if this continues

[ronaldson]

You may recall the Kaikoura earthquake led to a $65m+ gross insurance claim by Argosy for non structural damage ( and loss of rents ) to 7 Waterloo Quadrant in Wellington with around an 80% payout in final settlement after adjusting for the deductible. This highlights how risky investment in the capital actually is - damage to services and internals such as lifts can be substantial even if the structure itself stands up, and I believe another $15m has been incurred for facade maintenance subsequently.

In all these cases I don't doubt due diligence was undertaken before acquisition. It's just that, notwithstanding, the risk is always predictably and significantly on the downside in these situations.

[Snoopy]

I have been studying the Stride Annual Report for FY2023, after noticing some inconsistencies in my comparative table in the Listed Property Trust thread (post 1833), and the calculations I performed on Stride figures in post 1807 on the same thread.

Stride own 51.7% of industrial property subsidiary 'Industre' (not listed). AR2023 p31 shows the value industrial property on the Industre books is $785.975m. 51.7% of that interest is:
0.517 x $785.975m= $406.349m.
On the same page the SPL share of the company is noted as $406.636m. I am not sure why the discrepancy, but the two totals are equal to three significant figures. A rounding error in that '51.7%' share?

Now if we move to AR2023 p78, the properties on Industre's books 'Investment Properties' are said to be worth $496.025m. I was wondering if that might include undeveloped land as well? But it looks like it doesn't because if we return to p26 of AR2023.

"$786m as at 31 March 2023 (or $716m excluding properties categorised as ‘Development and Other’ in the financial statements)."
It looks like the $786m already includes the development properties to me.

So I am quite confused as to why 'Investment Properties' are listed as being worth $406.636m (p31) and $496.025m (p78) on different pages of the same report. Can any Stride shareholders help me out here?

SNOOPY

[Snoopy]

I am doing this calculation for the Property Trust thread. I thought it would be more appropriate if I put the detailed calculation here. SPG is a stapled security made up of:

a/ SPL (Stride Property Limited) a PIE AND
b/ SMIL (Stride Investment Management Limited) which is not a PIE


It
Dividend date
09-09-2022
09-12-2022
21-03-2023
22-06-2023
Total Year to 30-06-2023


SPL Net Dividend Amount
1.8455c
2.0702c
1.68083c
1.78083c


SPL Imputation Amount
0.196634c
0.351348c
0.533535c
0.268363c



SPL PIE Gross Dividend Amount
2.5632c
2.8753c
2.3345c
2.4734c
10.246c



SPL Imputation Percentage
9.63%
14.5%
24.1%
26.0%


SMIL Net Dividend Amount
0.6320c
0.4073c
0.16c
0.06c



SMIL Imputation Amount
0.245778c
0.158394c
0.0622222c
0.0233333c


SMIL Gross Dividend Amount
0.8778c
0.5657c
0.2222c
0.0833c
1.749c



SMIL Imputation Percentage
28%
28%
28%
28%


Total Gross Dividend
12.0c



SNOOPY

[winner69]

Strides white elephant Johnsonville

Best use of site is a 10 story apartment block (with a few shops underneath) but then Stride or the locals don’t want that

Says a lot about Jville

https://www.stuff.co.nz/business/350360535/decades-despair-desolate-wellington-mall-where-half-shops-are-now-empty

[Snoopy]

This new direction of Stride, is why it has split itself up into SPL (the property owning company) and SIML, (the property management company). It was necessary to do this to maintain the PIE status of SPL, even if from an investor perspective SPL and SIML are 'stapled' together as SPG, an entity that can't be uncoupled from a shareholder perspective.

Stride has created four property owning sub-units for operational purposes:

1/ 'Investore', which holds big box retailers as an asset class, the majority of which are Countdown supermarkets. This business unit is technically independent, as it has its own sharemarket listing. Stride has sold down their own direct holding to 18.8%.
2/ 'Industre', a joint venture with JPMAM (JP Morgan Asset Managers) representing various large overseas institutions. Stride's holding of 52% is forecast to reduce to 25% as partner JPMAM provides all the capital for property acquisitions to develop the business going forwards. Industre consists of a portfolio of industrial buildings. There is currently no mechanism for the general public to be able to invest in Industre directly.
3/ 'Fabric', which owns office buildings. An IPO for Fabric was proposed in September 2021, but was pulled from the market, Stride citing 'market conditions' as the reason. Stride intends to maintain some ownership in Fabric when the float eventually gets away.
4/ 'Diversified' which is a shopping centre owning unit comprising Queensgate (Lower Hutt), Chartwell (Hamilton), Remarkables Park (Queenstown) and a 50% interest in the Johnsonville Shopping Centre (Wellington). I am not sure of the history of this one, as Stride owns what seems like a miniscule 2.1% of that entity, although SPL do own the other 50% of the Johnsonville Shopping Centre that 'Diversified' does not own outright. I am not aware of any way the public can get a direct holding in 'Diversified'.

Stride (SIML) appears to be able to derive 'leasing fees' and 'long term management fees' (based on a percentage of the value of assets under management) from these entities, and - at the beginning when setting them up - an 'establishment acquisition fee' as well!

SIML does look like a very attractive business model. SIML is capital light in itself, but able to enjoy large fees from the assets of others.


A reminder in the quoted text above of the constituents that make up Stride. As Stride own outright the 'rival' Queensgate Shopping Centre in Lower Hutt, referred to in Winner's reference, perhaps they do not have much of an incentive to tidy up minority owned Johnsonville?

Wellington is actually pretty light on shopping centres. There is the aforementioned Johnsonville and Queensgate (although I wouldn't class Lower Hutt as part of Wellington, it is administered by a different council). There is the Karori Mall that is really a Countdown and New World supermarket with a bookshop and a couple of eateries IIRC. There is the Crofton Downs Mall which is almost entirely a Countdown supermarket and ... are there any others?

The good thing about Stride is that it rakes in management fees from other entities. The bad thing is that it is a 'bucket' for assets for which there is no market, like the office buildings in the failed 'Fabric' office building float. But I wouldn't think even if the Johnsonville Mall was forced to close, it would have that much of an effect on Stride going forwards. There is a Woolworths supermarket there as part of the Johnsonville Shopping complex, which surely will ensure a reasonable flow of potential customers arriving at the mall each week as well. And I can personally vouch for Zampellis at JMall as a destination eating place (cafe). But it is sad for the people of Johnsonville that the last refit was in 1993, over 3 decades ago!

Winner's comment on putting a ten story residential tower there makes sense. Johnsonville is right on the train line to downtown Wellington. Sounds like the kind of redevelopment job that Kiwi Property would be interested in taking on ('Build to rent' with a shopping mall below) .

SNOOPY

[winner69]

I'm a jville raised boy and mall opened when I was a teenager....still go there every now and again and mall is just as bad as it was back then.

The Countdown in the mall still has an old logo in the old colours ....apparently too hard to update but then there's a Woolworths across the road.

But as Snoops said why shod Stride worry too much about that.

[kiwikeith]

Strides white elephant Johnsonville

Best use of site is a 10 story apartment block (with a few shops underneath) but then Stride or the locals don’t want that

Says a lot about Jville

https://www.stuff.co.nz/business/350360535/decades-despair-desolate-wellington-mall-where-half-shops-are-now-empty

Sounds like a bit of a nightmare for Stride, but it needs some perspective. In the annual report, the Johnsonville shopping centre has been valued at $24m (SPG's share) which is around two percent of SPG's total assets. The valuation of the Johnsonville asset is based on a 'land based valuation' which I assume means is a valuation of the land only.

SPG seems a bit more risk than some of the other listed property companies because there are so many components in their basket of assets. However, it trades at a significant discount to Net assets (27% and that excludes its property management business) and still yields over 6% after tax. I bought more shares last week. It did have an unusual spike to $1.31 in the last 10 minutes of trading on Friday but I expect it to be back in the high $1.20s on Monday. With interest rates expected to fall over the next 12 - 18 months, the yield will start to have more appeal.

[Toddy]

I could imagine that any property that they own in Wellington comes with massive outwards cashflows.

The article fails to mention earthquake engineering costs across the Wellington Region portfolio. So there is probably alot more behind the decision not to spend more cashflow.

[kiwikeith]

I could imagine that any property that they own in Wellington comes with massive outwards cashflows.

The article fails to mention earthquake engineering costs across the Wellington Region portfolio. So there is probably alot more behind the decision not to spend more cashflow.


The valuation of the properties take account of estimated costs to reach current seismic standards. If the standards change when then the property values will change as well. Roughly one third of SPG's assets (does not include SPG's holdings in invetore) are in the Wellington area.