This article is from the Australian Property Journal archive
LISTED HomeCo Daily Needs REIT (HDN) has reaffirmed its guidance as its defensive portfolio of essential and national retailers returned strong occupancy, cash collection and strong re-leasing spreads, and announced $165 million of acquisitions across two brand-new Woolworths-anchored neighbourhood centres in Sydney.
The centres are located in high-growth areas Kellyville and Leppington. The Kellyville centre opened in December with 7,795 sqm of gross lettable area, and was bought for $78.4 million. The Leppington asset opened in August and measures 7,962 sqm. It was purchased for $74.7 million.
Both were acquired on initial yields of 5.4%.
HDN executed $300 million in asset sales throughout the first half of financial 2024, including HomeCo Midland in Perth for $75 million, broadly in-line with book values, partially recycling the funds into the new acquisitions.
“These high-quality acquisitions help to improve the overall composition of the portfolio, provide greater income security over the long-term, and accelerate the re-weighting to HDN’s model portfolio,” HMC Capital head of real estate and HDN CEO Sid Sharma.
HDN’s portfolio comprises neighbourhood shopping centres anchored by Woolworths and Coles and large format retail tenants such as JB Hi-Fi, The Good Guys, and Bunnings. Occupancy and cash collections exceeded 99% in the first half, translating re-leasing spreads of 6.4% whilst maintaining low incentives of circa 5%.
“This is underpinned by HDN’s exposure to a predominantly national tenant base, metropolitan locations and focus on essential retail and services, which are non-cyclical.”
“Our first half result benefitted from a continuation of the strong underlying fundamentals experienced by HDN in FY23,” said
“Our assets continue to outperform.”
Sharma said strong net operating income across the portfolio continued to support asset values despite a modest easing in capitalisation rates. The REIT saw a sliver of the value shaved off its portfolio in the latest round of valuations, with the total portfolio now valued at $4.678 billion.
HDN reaffirmed full-year guidance of funds from operations of 8.6c per unit and distributions guidance of 8.3c.
Sharma said development remains a key strategic focus for HDN as contracted returns continue to exceed the cost of capital, underpinned by strong national tenants who increasingly require more space in its predominately metro-located assets.
Throughout the period, the first stage of the broader precinct redevelopment at Cranbourne was completed, which was 100% pre-committed and delivered a 10%-plus ROIC, and HDN is on-track to complete $70 million of additional tenant demand-led development projects in the second, which are expected to achieve circa 7% cash on cash return. It also has multiple projects that could commence in the second half to achieve $120 million of commencements.
