This article is from the Australian Property Journal archive
THE HomeCo Daily Needs REIT (HDN) has offloaded its large format retail centre in Perth’s Midland for $74.8 million to the grandson of Alan Bond, while the trust recorded a 70% fall in full-year profit.
Banjo Bond is acquiring the 23,410 sqm HomeCo. Midland – occupied by tenants including The Good Guys, Petbarn, JB Hi-Fi, Officeworks, Nick Scali and Baby Bunting – through the property development and investment he co-founded, PWD.
The firm has launched a trust for the centre and is looking to raise $39.1 million, and is targeting a distribution of 8%.
HomeCo. Midland has 21 tenancies in total with a 3.4-year weighted average lease expiry and is on 42,640 sqm of land. It is trading at a 2.3% premium to book value.
HDN has also just paid $11.5 million for 28 Coomera Grand Drive in Upper Coomera on the Gold Coast, 9,000 sqm fuel station, takeaway, car wash and dog wash complex adjoining its HomeCo. Upper Coomera centre.
RWC had the listing.
Profit down, revenue up
HDN’s full-year profit fell by 70% in FY23, but the shopping, convenience and large-format retail centre landlord recorded a 77% uplift in revenue.
The HMC Capital spin-off’s full-year revenue came in at $351.5 million as funds from operations (FFO) increased from $105.6 million to $177.1 million.
On a per unit basis, FFO fell from 8.85c to 8.55c, while distributions rose from 8.28c to 8.30c, both in line with guidance. It provided FY24 FFO and distribution guidance of 8.6c and 8.3c per unit respectively.
Its profit fell from $335.1 million to $102.2 million in FY23.
“HDN successfully absorbed a material increase in interest costs and statutory charges in FY23 with these headwinds offset by strong underlying rental growth and development completions,” HDN CEO, Sid Sharma said.
“This strong result reflects our strategically located assets which have limited exposure to cyclical and discretionary retail expenditure.”
HDN maintained portfolio occupancy of over 99%, collected over 99% of rent, and netted positive re-leasing spreads to 6.0%.
“The strong rental reversion we are achieving demonstrates the pricing power of our real estate. Our portfolio valuations were resilient with rental growth partially offsetting cap rate movements.”
The group’s 55 daily needs assets across Australia have a combined value of $4.659 billion. It said 28 investment properties were independently valued as at the end of June with the remaining investment properties being internally valued, and the weighted average capitalisation rate of the portfolio was 5.5%, up from 5.3% a year earlier.
Sharma said that to accelerate HDN’s reweighting to the “model” portfolio, it has circa $285 million of contracted asset sales from large format retail assets with capital being redeployed into around $158 million of daily needs-focused strategic acquisitions and investments.
The REIT has a $600 million development pipeline and expects to commence over $120 million of value-accretive projects in FY24.
HDN has net assets of $3.1 billion and gearing increased slightly to 33.8%.
Interest rate hedging has increased to 91.5%.
During the period, HDN invested $50 million in HMC Capital’s Last Mile Logistics Fund, closed-end unlisted vehicle that will target core-plus transitional assets with the potential to unlock additional upside through repositioning the assets into non-discretionary daily needs uses with essential last mile real estate infrastructure.
