HomeCo Sell Bathurst LFR Development

8 February 2021

The HomeCo REIT has sold a large format retail centre in Bathurst which it re-developed out of the former Masters tenancy.

The Centre sits on a 5.2ha site at 3 Pat O’Leary Dr, Kelso, approximately 3km east of the Bathurst City centre with good access and exposure to the Great Western Highway.

The 16,047sqm Centre is home to Harvey Norman, Spotlight, PETstock, Godfreys, Home Sweet Home and Plus Fitness.

HomeCo sold the asset off market for $16.95m, slightly above book value to property group Argus.

HomeCo acquired the asset as part of its Masters portfolio deal back in 2016. At its IPO in 2019, HomeCo recorded the asset at a book value of $14.8m with leases only in place with Spotlight (related party), Fitness Plus and PetStock in the external buildings. HomeCo had hoped to secure additional tenants to a sub-divided Masters store, but abandoned those plans in 2020 when a deal with Harvey Norman was secured.

A number of external tenancies remain vacant and difficult to fill in the current market. The property was re-valued in June 2020 at $16.9m, reflecting an 8% cap rate.

HomeCo are yet to comment on the transaction which was secured in December 2020 and settled in late January 2021.

Our Views

The use of HomeCo’s close association with Spotlight to re-anchor the development and introduce other tenants into the old Masters stores has generally worked well, however the re-leasing of this project has been difficult.

The Centre sits just off the Great Western Highway and so lacks the exposure that these types of Centres really need.

I expect HomeCo have had to put in place a rental guarantee over the balance of the tenancies in order to satisfy Argus.