Aventus sets sail as home life drives sales boom

The retail landlord is benefiting as Australians stay home and stock up to improve their surrounds.

Aventus houses expanding national retailers who now make up close to 90 per cent of its portfolio, including Bunnings, JB Hi Fi, Officeworks, Harvey Norman and Adairs. Picture: NCA NewsWire / David Mariuz

Retail landlord Aventus has defied the gloom in the shopping centre sector as customers go on a spree in its large format centres to spruce up their homes.

The company backed by billionaire Brett Blundy lifted guidance as Australians stocked up on home goods to get through lock down and it expects buying to continue as they spend more time at home.

“There is the additional focus on the home because a number of people have been working from home as well,” chief executive Darren Holland said.

While annual spending on overseas holidays usually comes in at about $63bn Mr Holland says a big proportion of that has been diverted to spending on home items.

Aventus is in good shape as overseas travel is pushed back until at least 2022 and it is also getting a windfall from the emerging home building boom and the “wealth effect” of rising house prices.

Large format centres are benefiting rather than larger or city-based malls which are still weighed down by worries about crowds and weakness in department stores.

Aventus has no exposure to them and Mr Holland says that customers are chasing convenience and safety in large format centres that make social distancing “natural and easy”.

The company‘s tenants reported out-size profits during the crisis as people stocked up and while these are expected to moderate Mr Holland said they had built up profit buffers to absorb any shifts, including government stimulus rolling off.

“There are far more tailwinds than there are headwinds,” Mr Holland said.

Aventus defied the pandemic as foot traffic in its centres rose 8 per above previous levels and it believes tenants could benefit further from the shift towards also learning and entertaining from home.

Large format centres charge relatively affordable rent compared to other retail sub-sectors, and have continued to record strong sales growth and traffic performance despite the crisis.

Aventus houses expanding national retailers who now make up close to 90 per cent of its portfolio, including Bunnings, JB Hi-Fi, Officeworks, Harvey Norman and Adairs.

Most tenants also pay annual fixed rent reviews, with the weighted average at 3.8 per cent, helping the landlord while customers pour into these outlets.

Mr Holland flagged that the company was looking to seize consolidation opportunities, building its development pipeline and managing its capital in the next period.

The company also recovered about $2m of rent abatements and deferrals from retailers that traded more favourably than expected.

In a sign of that shift towards chains that supply home needs in suburban areas the company reported a lift in occupancy to 98.5 per cent, with minimal holdovers at just 2 per cent.

Aventus reported a 6.5 per cent lift in Funds from Operations to 10c per security and paid a distribution of 8.2c per security. The value of its retail portfolio also lifted by 2.4 per cent.

Aventus upgraded its fiscal 2021 guidance to FFO of at least 19c per security, showing growth of at least 4 per cent from fiscal 2020, which Mr Holland said assumed no further major outbreaks of COVID-19 and no new significant government restrictions.

While the building of large malls has stalled, Aventus redeveloped a Sydney centre and it opened fully leased in November.