Home Consortium in $5bn funds management push
Property group Home Consortium has taken a major step into funds management and flagged it aims to build its empire to $5bn.
Property group Home Consortium, best known for converting former Masters stores into shopping outlets, has taken a major step into funds management and flagged it aims to build its empire to $5bn across a range of property holdings.
In its latest play, the company has just snapped up a series of health and government properties that it could float on the ASX next year with hopes of growing a $2bn portfolio in the specialist area.
The move is part of the group’s strategy, driven by executive chairman David Di Pilla, to make running funds a bigger part of its overall $1.8bn business.
Known as HomeCo, the company is accelerating a push to become a manager of alternative real property assets at a time when interest rates are low and these sectors are less affected by the coronavirus crisis than traditional areas like malls and lower-grade office buildings.
“There is clearly strong investor support and momentum for the creation a second REIT focused on health, wellness and government services in 2021,” Mr Di Pilla said.
“We are creating an asset management business focused on funds built on reliable and growing rental revenue from businesses in essential services such as daily needs retail, health and wellbeing, childcare, aged care and government services centres.”
HomeCo has targeted $5bn in assets under management in the medium term. Mr Di Pilla said there was substantial investor interest in the stable and significant growth in the revenue characteristics of the health and wellness assets.
“During the course of 2021 we will conduct a dual-track process to determine whether the fund is brought to the ASX or perhaps operates, at least initially, as an unlisted vehicle with a select group of investors focused on growing the portfolio,” Mr Di Pilla said.
Although it is not a real estate trust, HomeCo could start to look more like property funds managers Charter Hall and Centuria which have outstripped rival groups focused on being landlords, and the company has also set up a capital partnerships unit to tap wholesale investors.
HomeCo is already backed by Mr Di Pilla’s own Aurrum Group, the founders of Spotlight, Chemist Warehouse and the Besen family. High-profile banker Matthew Grounds, the Oatley family and Aussie Home Loans founder John Symond also went into the HomeCo float last year. HomeCo on Friday raised $125m via a placement after agreeing terms to acquire a portfolio of six health, education and government services properties, which showed an initial focus on childcare centres.
It will make an initial outlay of $62m, rising to $131m as they are completed, but flagged larger ambitions to buy more assets.
The fresh acquisitions will lift HomeCo’s health assets to more than $400m and it wants to accelerate in the field, where rivals Centuria, Elanor Investors and Barwon have also been active with unlisted funds.
Advisers are to be appointed shortly on a dual-track process as the company weighs up a private institutional selldown or a float.
Mr Di Pilla said the ASX was missing a specialist health property fund, and there were also opportunities in associated areas.
He cited the “mega-trends” of an ageing population, the rising need for medical services and the barriers to entry in the specialist field.
“We really think there is an opportunity to build a very large portfolio of assets,” he said.
The Australian government estimates it will spend more than $1 trillion on essential health services and social welfare in fiscal 2020-24.
The company last month spun out the $800m HomeCo Daily Needs REIT via an in-specie distribution and also raised $300m for the vehicle, which investors backed. It comprised a portfolio of convenience-based supermarkets.
HomeCo has performed strongly since listing last year and its shares are up about 40 per cent, delivering healthy returns for some of the country’s wealthiest families which backed it when it snapped up the ex-Masters hardware properties for about $725m in 2016.
It has since redeveloped the best sites into shopping centres.
The institutional placement, via Goldman Sachs, was priced at $3.80 per share, a slim discount to its previous close of $3.90, as investors re-rate the stock as a fund manager.