HomeCo is seeking investor capital to allow it to acquire 3 supermarket assets and to extend into the Health Care space with a proposal to acquire an Aged Care asset in a related party deal from its CEO, David Di Pilla.
Home Co is seeking to raise $170 million to equity fund the acquisitions summarised above as well as the Parafield Retail Complex acquisition announced 23 June 2020.
The expansion into Health care assets is a new step for Home Co which they foreshadowed in their strategy in February. The group will likely separate the Health care assets into a separately listed vehicle called HealthCo once they have sufficient scale.
Driving the group towards Health care assets is a desire to participate in the growing demand for aged care services in the aging economy. According to Home Co, an additional 80,000 bed are required over the next decade to meet the Australian Government’s target provision ratio of 78 places per 1,000 people aged 70 years and over with the expansion of the sector requiring $56billion in investment capital for new and rebuilt places over the next decade.
The Aged Care asset proposed to be acquired by Home Co is Aurrum, Erina, a 250 bed residential aged care home situated approximately 82 kilometres north of the Sydney CBD. It is currently operated by Aurrum Aged Care. HomeCo propose to pay $32.59 million, which is intended to be funded by the payment of $12.59 million in cash and the issue of $20.0 million of new fully paid ordinary stapled securities at an issue price of $2.88. In conjunction with the acquisition, HomeCo will enter into a lease back agreement with Aurrum Aged Care in relation to the property for an initial period of 10 years, with two 10 year options to extend.
As the Aged Care facility is a related party transaction, completion is subject to Securityholder approval at a general meeting of securityholders, which is expected to be held in August 2020. Existing investors related to Spotlight (Zac Fried and Morry Fraid) and Chemist Warehouse (Mario Verrochi and Jack Gance) have indicated that intend to vote in favour of the proposals.
Other founding shareholders include Aurrum investors Mary and Alex Shaw and Greg Hayes and Perth-based Primewest's David Schwartz and John Bond.
In addition to the aged care asset, the Group will acquire 3 assets from Woolworths for an aggregate consideration of $127.8 million include:
- Prestons Place located at 1985 Camden Valley Way, Prestons NSW
- Vincentia Marketplace located at 8 Moona Creek Rd, Vincentia NSW (87.4% freehold interest )
- Rosenthal Shopping Centre located at 90 Vineyard Rd, Sunbury VIC
Each of the three properties are existing convenience based neighbourhood centres with Woolworths supermarkets as anchor tenants.
To support the acquisitions, HomeCo will undertake a $140 million placement which is fully underwritten by Goldman Sachs Australia Pty Limited and Jarden Partners Limited. The placement is to be be issued at a fixed price of $2.88 per new security, which represents a -4.0% discount to the last close price of $3.00 on 30 June 2020 and -6.9% discount to the 5 day VWAP of $3.09 on 30 June 2020.
HomeCo Executive Chairman & CEO David Di Pilla commented, "The acquisitions announced today are an exciting step for HomeCo and increase daily needs and HealthCo services tenant exposure to 47%, consistent with HomeCo’s strategy of increasing its weighting towards hyper-convenience based retail and healthcare & wellness assets. They also strengthen HomeCo’s relationship with Woolworths as a partner and key tenant."
The acquisitions are immediately accretive and result in pro-forma FY21 FFO guidance of at least $0.15 per security.
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