Units in convenience mall owner HomeCo Daily Needs REIT traded just above their $1.33 offer price as the largest IPO of the year made a subdued debut on the ASX.
Spun out of mall landlord and fund manager Home Consortium, the real estate investment trust, which will trade under the ticker HDN, had a market cap of $642 million pre-IPO.
A short while ago units were trading at $1.34 with over 2.5 million shares traded during the first half-hour of trading.
Home Consortium raised $300 million for the REIT based around the strong COVID theme of essential services retailing.
The $900 million portfolio of 18 metro malls anchored to supermarkets, large-format retailers and healthcare and services is forecast to deliver a distribution yield this financial year of 5.5 per cent on the offer price of $1.33.
HomeCo boosted the float with the acquisition of the Marsden Park Shopping Centre in Logan City in South East Queensland for $48 million on a yield of 6.75 per cent and a weighted average lease expiry of 8 years.
The acquisition will deliver a 4.5 per cent to its full-year earnings – or funds from operations (FFO), which were forecast at just under $19 million pre-IPO. Gearing will increase to 31 per cent from 26 per cent.
More than a quarter of the trust’s rental income will come from Woolworths and Coles leases with Super Retail Group, Spotlight, IGA and Amart among the Top 20 retailers by income.
Home Consortium will retain a 27 per cent stake in the Daily Needs REIT and may look to sell down malls held on its balance sheet into into the new vehicle, which it will also manage.
“This vehicle has been very carefully constructed. A lot of thought went into it.” Home Consortium chief executive David Di Pilla told The Australian Financial Review prior to the float.
“It’s been diversified by [retail] sub-sectors, tenants and geography so it should perform under all market conditions.
“Our rent collections were in the mid 90 per cents during pandemic. The November rent collection is at 94 per cent and we expect that to get up to 98-99 per cent [by the end of the month.”
“We’ve kept our exposure to discretionary retail very low,” he said.
Mr Di Pilla said the focus would be to grow assets under management by investing along the lines of the model portfolio: 50 per cent
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