The newly-listed $900 million HomeCo Daily Needs REIT will use the firepower of its balance sheet to expand the portfolio across regional Australia which is experiencing strong growth as the population moves away from city areas.
The REIT, which made its ASX debut on Monday, is a spin-off from the HomeCo retail fund, which itself floated in October 2019. It has a portfolio of 18 assets, anchored by food, health and medical and large format retailers.
The David Di Pilla backed HomeCo, whose hyper-convenience retail model grew out of Woolworths’ failed Masters hardware sites, has grown its funds under management to $1.2 billion and has seen an increase in asset value, despite the global pandemic.
Mr Di Pilla told The Sydney Morning Herald and The Age, the HomeCo group, which combined own 40 assets, was pleased with the debut of the new REIT and the business was in the market for assets where value can be added through development. The list price was $1.33 and the REIT was trading at $1.36 on Tuesday.
Being focused on food and less on non-discretionary speciality stores allowed the overall HomeCo business to remain mostly open during the national lockdown phase of the pandemic and now all stores are open, has collected up to 96 per cent in rent.
“We look at everything on a return basis. So we won’t necessarily be the lowest bidder for an asset in terms of cost of capital, but we will look through the long term value of the asset,” Mr Di Pilla said.
“And so what we’re looking for is quality assets in metropolitan and large regional centre locations and assets where we can add value. We’ve come up with a model portfolio that has diversification across sub sectors, across tenants and across geography.”
The HomeCo business has a solid balance sheet and raised an additional $300 million with the new REIT to add to the cash available for acquisitions.
The trust will have a deliberate focus on hyper-convenience and daily needs tenants and a strong diversification across tenants, sectors and geographies.
Mr Di Pilla said these tenants have proven to be resilient through the pandemic, particularly in the health and wellness sectors and that will be an area of growth.
To mark its debut the new REIT has bought the Marsden Park Shopping Centre in Brisbane’s south-west, which is anchored by supermarket giant Coles, from QIC for about $48 million.
The new fund will be managed by the parent HomeCo and the board will include property stalwarts Simon Tuxen, formerly at Westfield, and Simon Shakesheff from Stockland as independent non-executive directors.
Former UBS banker Matthew Grounds, the Oatley family and Aussie Home Loans founder John Symond also backed the HomeCo float last year.