This article is from the Australian Property Journal archive
LARGE format retail player HomeCo Daily Needs REIT (ASX: HDN) has offloaded a Sunshine Coast asset for $140 million, at a 6% premium to book value, in one of the sector’s biggest deals of the year.
HDN announced the sale as it unveiled a 30% increase in its full-year funds from operations in its first annual results since it took over ASX-listed big box retail rival Aventus that took the trust’s portfolio to $4.6 billion.
FFO was 8.85c per unit, or $105.6 million, ahead of guidance of 8.8 cpu. Distributions lifted 18% to 8.28 cpu, in line with guidance.
However, like many other REITs it is expecting lower FY23 due to rising borrowing costs. Pro forma FY23 FFO guidance is 8.6 cpu and DPU guidance 8.3c.
On the sell side of the Amart Furniture-anchored Maroochydore asset sale is billionaire John Van Lieshout, who founded the furniture store chain in 1970 before selling it off in 2006 to Ironbridge Capital.
HDN chair, Simon Shakesheff said the trust has taken proactive capital management measures to strengthen its balance sheet with the sale of the asset, reducing pro forma gearing to 30.6% – at the bottom-end of its target gearing range – while repayment of debt following the sale will increase HDN’s interest rate hedging to 73.5% and provide greater income certainty.
HDN’s portfolio recorded valuation gains of $203 million over the second half, which CEO Sid Sharma said “under which underscores the growing demand for daily needs assets from both private and increasingly, institutional investors.”
“Investors remain attracted to high quality daily needs assets offering defensive income streams underpinned by attractive long-term megatrends. We believe the shift to omni-channel retailing is a long-term structural tailwind which is driving the evolution of our asset base into critical last mile infrastructure.”
Portfolio occupancy above 99% and more than 99% of rent was collected, while leasing spreads were 5.7% to the positive across 200 deals.
It recorded 5.1% comparable property NOI growth.
HDN’s development pipeline increased to $500 million, including several large-scale opportunities. It completed $37 million of developments with a 10% ROIC. Over $75 million of new development projects will commence in FY23 with a target ROIC of about 7%.
“The REIT is in a strong position to fund its accretive development pipeline and capitalise on attractive acquisition opportunities which may emerge with ongoing macroeconomic uncertainty and market volatility,” HDN CEO Sid Sharma said.
The Sunshine Coast sale is the second major large format retail transaction this week after the Les Ansley family sold the Homeworld Helensvale centre has sold for $265 million, setting a record transaction figure for a Queensland large format retail as well as the largest deal in the sector nationally since 2017.
According to the latest MSCI Real Assets, retail deals slumped 28% to $3.0 billion.
