In announcing FY20 results Home Co confirmed its intention to split its growing REIT to create a new daily needs REIT.
Executive Chairman and Chief Executive Officer, Mr David Di Pilla, said “It is pleasing for our maiden full-year reporting period to present such a strong set of results which deliver against our prospectus forecasts. The strength of our portfolio has been highlighted by our portfolio valuations increasing 5.2% since Dec-19. We have also demonstrated our ability to proactively and effectively manage the uncertainty caused by COVID-19 by documenting 99% of FY20 COVID-19 tenant relief. Importantly, through the recently announced acquisitions of three Woolworths anchored centres, Parafield and Aurrum Erina we have increased our exposure to Daily Needs and Healthcare & Wellness services tenants to 47%.”
Key Highlights
- FY20 pro-forma Freehold FFO 13% ahead of prospectus forecast
- 99% of FY20 COVID-19 tenant relief agreed and documented
- 91% cash collection in Jul-20 and similar collections expected for August
- Portfolio valuation increased 5.2% (net 1.7% after capex)
- 7.5 cps fully franked FY20 final dividend declared
- Pro-forma Jun-20 gearing of 32.4% and liquidity of $109m Operational and portfolio highlights
- $1.2bn AUM across 361 assets reflecting 30% growth in AUM since IPO
- 47% exposure to defensive Daily Needs and Healthcare & Wellness services tenants
- Sustainable and resilient cash flows backed by long WALE of 8.1 years
- Occupancy of 97.8% being an increase of over 5% since IPO
- Trading occupancy of 91.1%4 increasing from 81.3% at the time of the IPO
- Annual like for like Jun-20 and Jul-20 foot traffic growth of 18% and 16% respectively versus pcp
COVID-19 Impacts
HomeCo provided $5.7 million in COVID-19 tenant support during the 4th quarter of FY20 (versus 7-May guidance of $6-7m) of which:
- $1.0m reflects rental deferrals which had no FY20 FFO impact
- $4.7m reflects rental abatements
HomeCo’s proactive COVID-19 strategy has resulted in 99% of FY20 COVID-19 tenant relief agreed and documented. 91% of Jul-20 rent is cash collected and similar cash collection is expected for Aug-20. The FY20 cash flow impact was fully offset by corporate cost savings and a reduction in the final FY20 dividend to 7.5 cps.
New REIT
HomeCo also announcement its intention to establish an ASX listed Daily Needs REIT (“DN REIT”) through an in-specie distribution to securityholders. HomeCo will own a stake in the DN REIT post in-specie distribution and act as responsible entity to the DN REIT. Existing HomeCO securityholders would receive new securities in DN REIT proportional to their existing shareholding and have the opportunity to vote on the in-specie distribution expected to be completed in late 2020 / early 2021.
The proposal will split the existing REIT in two companies with different investment attributes:
- DN REIT which will own a portfolio of stabilised, convenience based daily needs focused assets targeting consistent, growing distributions to securityholders and
- HomeCo which will be the Owner, developer and manager of diversified property investments including the Daily Needs REIT and HealthCo
Outlook
Executive Chairman and Chief Executive Officer Mr Di Pilla said “HomeCo is on track to execute its strategy to deliver above average risk-adjusted returns and remains focused on creating a platform for sustainable long-term growth via the own, develop and manage model. The recently announced acquisitions of daily needs and healthcare & wellness assets in July 2020 provides the foundation for the next phase of HomeCo’s evolution under our Own, Develop and Manage strategy and we are pleased to announce our intention to establish an ASX listed Daily Needs REIT and the development of a Healthcare & Wellness unlisted fund which together form the platform from which we will deliver sustainable growth into the future.”
HomeCo is well placed to withstand any future COVID-19 developments with a strong liquidity position, diversified tenant mix and competitive rent offering and this is reflected in our current rent collections. In light of recent COVID-19 developments, including the Melbourne Stage 4 restrictions, HomeCo considers it appropriate to provide no FY21 earnings guidance.
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