Elanor Retail has Room to Grow

23 February 2021

The listed Elanor Retail Fund has managed to withstand most of the COVID impacts on retail with rental collections and occupancy at comparatively high ratios. The non-discretionary nature of the retail assets has supported earnings of the fund.

The intended sale campaign of several non core assets, which represent 60% of the Fund, was postponed in 2020 due to COVID and is likely to be re-considered in 2021.

Core Earnings for the period were $6.5 million or 5.10 cents per security, down -8.4% on the previous corresponding period. The Core Earnings result includes $1.4 million profit realised on the sale of the Auburn Ambulance Station property in the period.

Fund Manager, Michael Baliva, said “We are particularly pleased with the performance of the Portfolio over the six months to 31 December 2020. The Fund’s Income Assets have performed strongly, with 98% of rent collected for the period and trading occupancy at 99%.”


  • Core Earnings for the period of $6.5 million (1HFY20: $7.1 million) or 5.10 cents per security for the six months ending 31 December 2020
  • Distribution for the six months of $6.2 million or 4.84 cents per security (based on a 95% payout ratio)
  • Auburn Central sale completed on 23 December 2020 at a gross sales price of $129.5 million (4.0% premium to book value) generating a 24.5% IRR for security holders
  • The Fund collected 95% of its rental income for the six months to 31 December 2020
  • Fund’s trading occupancy is 99% of leased area
  • Portfolio valuations have remained unchanged from 30 June 2020 at $209.2 million (weighted average capitalisation rate of 7.42%)
  • Significant progress on the divestment program of the Fund’s income assets

“We remain focused on unlocking the value in the Fund’s Tweed Mall property. The asset will continue to benefit from the introduction of the ALDI supermarket and the repositioning of the centre’s retail mix to non-discretionary focused offerings. Furthermore, we are repositioning the Tweed Mall asset into a triple-supermarket anchored, neighbourhood shopping centre having successfully completed the repositioning of the Fund’s Auburn Central property”, said Michael Baliva.

Stage 2 of the Tweed Mall will seek to add a 4,000m2 Commonwealth Government office or a potential high rise residential development.

Proposed Office Building atop Tweed Mall

Commenting on the result, ENN CEO, Glenn Willis, said: “The resilient performance of the Fund’s Income Assets over the period has been pleasing. We are also pleased with the successful realisation of ERF’s Auburn Central property that generated a 24.5% IRR for the Fund.”

“The defensive nature of our non-discretionary focused portfolio is highlighted by its strong rental collections and the strength of the Fund’s property valuations in these challenging times. We remain confident that the Fund is well positioned to grow value for security holders.”


The Fund’s key strategic objective is focused on actively managing and growing earnings from its investment portfolio and acquiring additional high investment quality, Value-Add, retail properties.

The Fund is well positioned to enhance value for security holders by executing on the divestment program of ERF’s Income Assets and the current initiatives to realise operational and strategic opportunities across the Portfolio.

Our Views

The Fund has a good track record in repositioning retail assets, which is a difficult task in the current market. Replacing Major stores with a mix of specialty and supermarket tenancies can work in some Centre but existing competition and cost and time impacts are challenging.

Elanor’s sale of Auburn Central is a good example of what can be achieved. Their progress also on Tweed Mall appears encouraging, however the Stage 2 Masterplan which looks to include and Office building or residential apartments bears some further consideration.

The balance of the portfolio is likely to find buyers in the market at prices which may be better than book value.

ERF is trading at 1.07 which is a 22% discount to NTA of $1.38.

There is no guidance on the full year distribution, however with a 6 month distribution of 4.84c, the distribution yield is 9% which is very attractive.

ERF are on our recommend list due to its strong distribution yield, its exposure to non discretionary & value add retail and an expectation that asset sales will exceed book values.