Investore related party deal goes ahead

NZX listed property company Investore has completed its $78.8 million acquisition of three Bunnings warehouses from its manager, Stride Property.

Investore shareholders voted for the deal at a special meeting in Auckland. The meeting was held as the sale is a material transaction with a related party under NZX listing rules.

Bunnings warehouses in Hamilton, Palmerston North and Rotorua will now come under Investore’s 39-store big format retail portfolio on initial 12-year leases signed in December last year.

The warehouses will return net rent of $4.81 million and rental growth of 2.5% a year.

Bunnings has the right to renew the lease for a further eight terms of six years, giving a total lease of 60 years. During the lease renewals market rent reviews will be carried out every 12 years.

It has taken some time for the deal to go ahead.

Investore, a previous subsidiary of listed vehicle Stride, was spun into its own entity in May 2016, with Stride continuing to manage it and retain a 19.9% stake.

When Investore launched its IPO, four properties leased to Bunnings were kept by Stride as the terms for transfer could not be agreed with the Australian-owned hardware business empire.

Subsequently, Stride restructured three of Bunnings’ leases and a conditional sale and purchase was agreed between Stride and Investore in November last year, with settlement expected at the end of this month. 

The independent JLL valuations for each site were $28 million for Hamilton, $26.2 million for Palmerston North and $25.2 million for Rotorua, implying a passing yield of 6.1% on the total of $79.5 million. Investore is buying the Bunnings properties at a 1.3% discount.

Financing
Investore will use its bank debt facilities to fund the deal, raising its loan to value ratio to 46%, just shy of the board’s maximum LVR of 48%.

To offset the purchase of the Bunnings properties, Investore has an unconditional agreement to sell Fresh Choice in Queenstown for $11.1 million and is expected to settle in March. It is also selling two Countdown properties in Hornby, Christchurch and Dunedin South. Tenders for the properties close in just over 10 days.

Board chairman Mike Allen says the sales are intended to provide balance sheet capacity for future activities.

He says the Bunnings properties will also provide diversification of Investore’s tenant mix.

“The transaction results in a reduction of the Countdown concentration from 81% to 73% of gross contract rental.” DNZ Property Fund, now Stride Property, bought 19 Countdown supermarket sites around the country in a deal worth $287 million from Antipodean Supermarkets and Antipodean Properties in 2015.

The Bunnings properties will represent 10% of Investore’s total portfolio gross contract rent, making it the property company’s second-biggest tenant.

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