Elanor Retail Fund rationalising Portfolio

23 August 2021

Elanor Retail Fund is continuing its portfolio rationalisation strategy with further asset sales planned for the year ahead.

The Fund has now completed the sale of 2 of its assets, equating to 42% of its total book value with other assets due to hit the blocks in the year ahead.

Core Earnings for the FY21 were $11.7 million, or 9.14 cents per security. Distributions for the year ended totalled 20.67 cents per security (including the Special Distribution of 12.0 cents per security in respect of the gain on realisation of Auburn Central).

Fund Manager, Michael Baliva, said “We remain focused on unlocking the significant value upside in the Fund’s Value-Add asset, Tweed Mall, through the execution of our strategy to reposition the Centre’s retail mix and realise on the asset’s significant mixed-use value-add potential. We are particularly pleased with the strong performance of the Fund’s Income Assets over the period and a further realisation of the Funds Income Assets with the sale of Moranbah Fair at book value in August 2021.”

The sale of Auburn Central was completed for a gross sales price of $129.5 million following the transformation of the centre into a triple-supermarket anchored, metropolitan neighbourhood shopping centre. Trading activity across the Fund’s portfolio recovered (post Government imposed restrictions during the year) with 100% of the Fund’s tenants trading as at 30 June 2021.

Commenting on the result, ENN CEO, Glenn Willis, said: “We are pleased with the performance of the Fund’s Income Assets and the progress of the repositioning of Tweed Mall, a significant value-add opportunity for ERF. The defensive nature of our non-discretionary focused portfolio is highlighted by its strong rental collections (99% for the period) and the strength of the Fund’s property valuations in these challenging times. We remain confident that the Fund is well positioned to continue to grow value for securityholders.”

The Fund’s core strategy remains focused on actively managing and growing earnings from its defensive investment portfolio, realising value-add opportunities and acquiring additional high investment quality, value-add, retail properties.

Whist market conditions in the retail sector remain challenging and uncertain, the Elanor believe the Fund is well positioned to enhance value for securityholders by executing strategic initiatives to reflect the capital value of the Fund. Elanor did not provide any guidance for FY22.

The Elanor Retail Fund REIT is on our Top Picks List. We note that with just $156m of net assets, the REIT may not be of sufficient scale to offer suitable liquidity for investors.

The REIT commenced the year with a security price of $0.91 against a NAV of $1.22 (-32% discount to NAV) and closed the year at $1.14. The REIT provided a 8.67c ordinary distribution and a 12.0c special distribution for FY21, equating to a total 22.6% yield, which together with a 24% lift in unit price would provide investors with a total return of 47%.

Key financial and operational highlights for the period are:

Financial highlights:

  • Core Earnings of $11.7 million (FY20: $11.1 million), or 9.14 cents per security
  • Distributions for the period of 20.67 cents per security, including the 12.0 cents per security Special Distribution
  • Rent collections of 97% for the period
  • 2.7% increase in portfolio value to $215 million since 30 June 2020
  • Conservative gearing at 21.1%
  • Fund NTA of $1.22 per security (post Final Distribution of $0.04 per security and Special Distribution of $0.12 per security)

Operating highlights:

  • Portfolio weighted average lease expiry (WALE) of 4.4 years
  • $215 million property portfolio
  • Portfolio cap rate 7.3% as at 30th June 2021
  • Completed sale of Auburn Central
  • Post Period – Completed sale of Moranbah Fair

Portfolio Update

Portfolio is 95.3% occupied with a WALE of 4.4 years by base rental income and 4.2 years by lettable area. In addition to a 4% vacancy rate, the Fund also has 15% of tenants (by area) on month to month agreements of which 9% reflects the Target DDS at Tweed Mall, providing flexibility ahead of the Centre repositioning.

The key highlight for the period was the sale of Auburn Central in December 2020 for $129.5 million, a 3% premium to book value. The REIT has also recently announced the sale of Moronbah Fair for $28m with the proceeds used to repay debt facilities in the Fund ahead of planned works at Tweed Mall and Manning Mall.

The divestment of Gladstone Square, Glenorchy Plaza and Northway Plaza will commence following successful execution of leasing and development initiatives at those Centres.


Overall, the 6 remaining assets in the portfolio increased in value by 2.7% to $215m despite a 40bps softening of cap rates.

FY22 Guidance

The REIT reconfirms that based on information currently available and barring any unforeseen events or further COVID-19 impacts, FY22 Operating EPS guidance of growth of no less than xxx% over FY21 Operating EPS of xxxcents. This equates to a forecast FY22 EPS of xxx% based on xxxx closing price as at 1 July 2021 of $xxxx.

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