HomeCo Benefiting from Daily Needs of Consumers

20 February 2023

HomeCo Daily Needs REIT released its results for the half-year ended 31 December 2022 today underscoring their conviction on the Neighbourhood & LFR and Health & Wellness sectors with strong leasing and increasing income supporting an 8% increase in FFO per unit.

HDN CEO, Sid Sharma said, “Our 1H FY23 result marks a continuation of our strong underlying growth trajectory with HDN delivering solid rental growth, cash collection and net valuation movements. Our operational results are underpinned by strong tenant demand for both our existing portfolio and developments, which is translating into solid rental growth.”

“We continue to drive additional growth through accretive acquisitions and developments. In the half we realised ~$210m from the disposal of Sunshine and Epping and deployed ~$143m into strategic acquisitions and investments. Our acquisition of Southlands Boulevarde in Perth at a fully-let yield of ~8% is immediately FFO accretive. Similarly, our strategic $50m commitment to the Last Mile Logistics unlisted fund has the potential to create a significant future acquisition pipeline for HDN.”

“Our development pipeline remains a key pillar of our growth strategy and we are on-track to see a material step change in development commencements in FY24 to over $120m from $80m in FY23. The identified development pipeline has now increased to over $600m beyond FY23. Importantly, we remain well positioned to generate attractive incremental returns on capital and our projects continue to be significantly de-risked through early builder engagement and tenant pre-leasing,” Mr Sharma said.

HMC Capital Group CFO, Will McMicking said, “HDN is well positioned as we move into a more subdued economic environment with a highly defensive tenant base, low and sustainable rents, minimal vacancy and expiries and a strong balance sheet. The marked increase in net overseas migration will significantly benefit our portfolio which is strategically located in Australia’s leading metropolitan growth corridors”.

“We are pleased to today reaffirm our FY23 FFO and DPU guidance with better-than-expected underlying income growth from our portfolio offsetting higher interest costs now assumed in our guidance. Importantly, HDN’s balance sheet is well positioned to support our growth initiatives including accretive acquisitions which are not assumed in guidance,” Mr McMicking said.

Financial highlights

  • 1H FY23 FFO of 4.3 cpu ($89.4m) up +8% versus the pcp
  • 1H FY23 DPU of 4.2 cpu up +2% versus the pcp
  • Gearing of 31.5% versus 32.7% at Jun-22 and pro-forma interest rate hedging of ~70%
  • NTA/unit of $1.52, in-line with Jun-22, with rental growth offsetting cap rate movement

Operational highlights

  • >99% occupancy
  • >99% cash rent collections in 1H FY23
  • +5.9%3 positive leasing spreads across 75 leasing deals

Investment highlights

  • On-track to deliver >$80m of developments in FY23 at a ~7% ROIC
  • Announced >$120m of new development projects to commence in FY24
  • Development pipeline beyond FY23 increased to >$600m (from $500m)
  • Divested Sunshine Coast and Epping for $210m at a combined 4.6% premium to book value
  • Acquisition of Southlands Boulevarde, a triple supermarket anchored daily needs centre in metropolitan Perth for $92.5m
  • $50m strategic investment in HMC Capital’s unlisted Last Mile Logistics Fund

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