This article is from the Australian Property Journal archive
HOMECO’S Daily Needs REIT (HDN) is tapping investors to cover nearly half of its $160 million acquisition of a Woolworths and Bunnings-anchored town centre in south east Brisbane, which takes its portfolio value beyond $1.5 billion.
The acquisition price for TownCentre Victoria Point represents a fully leased yield of 4.75%, while the trust is eyeing off the 7.6 hectare site’s development potential.
It said the purchase is consistent with its strategy to acquire “stabilised, predominantly metro-located and convenience-based assets” with 60% neighbourhood, 22% large format retail and 18% health and services tenants. Woolworths and Bunnings are joined in the 20,892 sqm centre by Healius, BWS, ALH Group, Dan Murphy’s, McDonald’s, Petbarn, Supercheap Auto and Godfreys, among others, and there are 866 on-grade car parks.
The property has weighted average lease expiry of 7.1 years with 98% occupancy and a fixed weighted average rate of return of 3.44%. It was bought from the private developer following a sales campaign managed by Nick Willis and Sam Hatcher of JLL.
HDN said the large-scale asset with nine buildings has a low site coverage of 27% that “presents significant development upside”, and is strategically located in south east Queensland growth corridor and accessible from two major arterial roads.
“Opportunities to acquire an asset of this quality and scale are rare, particularly one which complements our strategy and existing portfolio so strongly,” HDN fund portfolio manager, Paul Doherty said.
“This well-located flagship convenience property is anchored by high quality, strongly performing tenants on long term leases with attractive organic growth. In addition, the property offers significant long-term potential to drive enhanced returns through development by capitalising on the property’s significant expansion potential.”
Listed late last year, HDN’s exposure to the resilient large format retail sector underpinned a 6.5% revaluation uplift to its portfolio, and the latest purchase puts its portfolio value above $1.5 billion. It also recently bought seven large format retail asset sales from its parent HomeCo for $266.4 million and the Armstrong Creek Town Centre near Geelong for a further $55.6 million.
The fully underwritten institutional placement to raise $70 million is being issued at $1.45 per unit, a 3.0% discount to the previous close price of $1.495, to help cover the $172 million in total transaction costs. The remainder will be sourced from debt.
The acquisition is immediately accretive to its previous FY22 funds from operations per unit guidance of 8.3c per unit. New units will be entitled to the distribution for the September quarter and included in any bonus units.
Balance sheet gearing is expected to be at the mid-point of its target 30 to 40% gearing range post-transaction.
HDN also said there is now increased potential for inclusion in both the S&P/ASX 300 Index and FTSE EPRA NAREIT’s Global Real Estate Index at September 2021 rebalance.
