This article is from the Australian Property Journal archive
DESPITE an asset revaluation setback, shopping centres owner HomeCo Daily Needs REIT will continue to pursue non-core divestments and look at unlocking value from its underutilised 2.4 million sqm land bank.
The REIT announced first half year funds from operations of $88.5 million (4.3 cents per unit), which is marginally down on the $89.9 million (4.3 cpu) in the previous corresponding period.
The group posted statutory loss of $10.7 million compared to a profit of $116.8 million in the pcp, due largely to the $94.6 million fall in asset value versus a $35.9 million gain the pcp.
Operating EBITDA was $120.4 million versus $121.3 million in the pcp. Distribution increased to 4.3 cpu compared to 4.2 cps in the pcp, the trust reaffirmed its FY25 FFO guidance of 8.8 cpu, representing 2.3% growth versus FY24.
HMC Capital managing director and HomeCo CEO Sid Sharma said the trust continues to deliver strong top line income growth through focussed development, management and leasing of the portfolio.
“Our asset recycling continues to enhance portfolio quality to support sustained earnings growth while maintaining a strong balance sheet with gearing at the mid-point of our target range,”
During the period the trust divested around $250 million worth of assets, on an average yield of 6% and broadly in line with book value.
And it recycled that capital into more high yielding investments, acquiring approximately $200 million worth of properties on an average yield of 7%.
“Our development pipeline remains robust at over $650 million, with both commenced and future projects targeting ~7%+ ROIC. We remain on track to commence between $100-120 million of development projects in FY25, which includes projects already underway at Tuggerah and Castle Hill,” said Sharma.
Fund manager Paul Doherty said the first half performance reflects strong operational execution and proactive balance sheet management.
“We achieved 4.0% comparable NOI growth driven by 6.1% re-leasing spreads and 3.6% weighted average rent reviews. These solid operational results underscore the strength of our assets and tenant relationships.”
“The acquisition of Lutwyche (a convenient daily needs asset) and sale of Logan (a traditional LFR asset) improved portfolio composition and will further strengthen our financial position, reducing gearing to 34.6%. Approximately 80% of drawn debt remains hedged, providing HDN with strong interest rate protections and ensuring we are well-positioned for the future. In addition, NTA per unit increased to $1.45, demonstrating the resilience of our portfolio,” he added.
Looking ahead, the trust said its portfolio will be underpinned by strong rental reversion and growth because HomeCo’s average portfolio rent is approximately 30% below the national average.
The trust’s average portfolio rent stood at $386 per sqm, whereas the national average is $551 per sqm.
The trust will also continue to recycle capital to fund organic growth and increase exposure to more defensive assets, whilst at the same time look at unlocking its expansive 2.4 million sqm land bank portfolio.
Doherty reaffirmed FY25 FFO and DPU guidance of 8.8cpu and 8.5cpu, representing 2.3% growth and 2.4% growth over FY24, respectively.