HomeCo released the latest valuation numbers for their Daily Needs REIT supporting their proposition that the portfolio strategy is in line with the shift to to omni-channel retailing and last mile convenience.
HomeCo Daily Needs REIT CEO Sid Sharma, said: “The portfolio recorded strong valuation gains highlighting the growing demand for daily needs assets from both private and increasingly, institutional investors. Investors remain attracted to high quality daily needs assets offering defensive income streams underpinned by attractive long-term megatrends. We believe the shift to omni-channel retailing is a long-term structural tailwind which is driving the evolution of our asset base into critical last mile infrastructure.”
“HDN’s high quality and strategic asset base remains well positioned for the higher inflation and interest rate environment we are now facing. The portfolio is in strong shape with 99% rent collection and 99% occupancy, providing a strong platform to drive rental growth and new income streams via development. With more than 77 million total annual customer visits, foot traffic remains robust and increased by 1.4% in the March quarter versus the prior corresponding period.”
“We are making significant progress unlocking and accelerating our value accretive $500m+ development pipeline with over 30 projects in various stages of planning. Our FY22 projects are on track and on budget and we are now targeting to commence in excess of $75m of developments in FY23 at a ~7% ROIC. Our Glenmore Park and Mackay projects have received authority approvals for development, have strong customer demand and are in detailed design.”
The HomeCo Daily Needs REIT revealed a $235m gain in valuations, representing a 5.2% uplift from Dec 2021 from 32 independent valuations and 25 properties completed by internal valuation.
The preliminary valuations, which remains subject to year-end audit have increased by $235 million (+5.2%) to $4,786 million (from 31 December 2021 to 30 June 2022). Net of capital expenditure incurred during the period of $26 million, this represents a net valuation increase of $209 million (+4.6%). Approximately 41% of the net valuation increase was driven by income growth (with the balance from cap rate movement).
| Preliminary unaudited portfolio valuation | Independent valuations ($m) | Internal valuations ($m) | Total ($m) | Portfolio WACR (%) |
| # of properties | 32 | 25 | 57 | |
| Pro forma 31 December 2021 valuation | $2,047m | $2,505m | $4,551m | 5.56% |
| Capital expenditure | $17m | $9m | $26m | |
| Net valuation increase | $159m | $50m | $209m | |
| 30 June 2022 valuation | $2,223m | $2,563m | $4,786m | 5.34% |
| Gross increase | +8.6% | +2.3% | +5.2% | |
| Net increase | +7.8% | +2.0% | +4.6% |
DEVELOPMENT UPDATE
With a portfolio spanning 2.6 million square metres of site area, including across Australia’s leading metropolitan markets and growth corridors and low average site coverage of only 37%, HDN is positioned to expand its last mile logistics infrastructure network via accretive development opportunities. HDN’s development pipeline remains the optimal use of incremental capital and provides the greatest opportunity to generate enhanced income and NTA growth.
Since the merger with AVN, HDN has undertaken a detailed review of the portfolio to identify priority projects which can commence over the medium-term and increase HDN’s annual capital expenditure programme. The development pipeline is now in excess of $500m across 30 projects in various stages of planning. Over $100m of near-term projects now have requisite approvals from planning authorities and we expect to activate approximately $75m of projects in FY23 with a ~7% ungeared ROIC target.
HDN projects continue to be tenant led and supported by strong trading conditions for tenants in a post-covid landscape.
Three key projects which are expected to commence in FY23 include;
- HomeCo Glenmore Park development will add ~2,400m2 of GLA to our existing daily needs town centre and will be anchored by government services, health and wellness tenants. Home Co have received leasing commitments for over 75% of GLA and requisite planning approval. Construction is expected to commence in Q1 FY23.
- HomeCo Mackay leisure and lifestyle precinct has received planning approval for >17,000m2 of GLA. The precinct complements the existing >14,000m2 large format retail centre and has received over 64% leasing commitments from national brands in the leisure and lifestyle categories. Construction is expected to commence in Q1 FY23
- HomeCo Nowra development has received planning approval for >11,000m2. Tenant demand is strong with over 75% leasing commitments from national brands in the wellness, leisure and lifestyle categories. Construction is expected to commence in Q1 FY23 noting that Nowra is an ex- Masters building undergoing conversion.
JUNE 2022 QUARTER DISTRIBUTION DECLARATION
HMC Funds Management Limited as Responsible Entity of HDN has declared the quarterly distribution for the period 1 April 2022 to 30 June 2022 of 2.12 cents per unit taking the full-year distribution to 8.28 cents per unit.
The distribution is consistent with guidance provided in HDN’s 1H FY22 results. The Distribution Reinvestment Plan is activated for this quarter with no discount.
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