HomeCo beats forecasts during pandemic, flags new REIT

Convenience-based centres have protected HomeCo from the worst of the pandemic.

David Di Pilla, a former UBS banker, said HomeCo was on track to execute its strategy.

Retail landlord HomeCo is defying the coronavirus pandemic with its empire of convenience retailer stores on former Masters sites performing well as consumers stay home and spend up on their daily needs.

The company, backed by some of Australia’s wealthiest families, is betting that convenience-style retail will surge as the economy emerges from the pandemic and is readying to spin off a specialist retail real estate investment trust with up to $600m of assets on the Australian Securities Exchange.

“We’re looking at other opportunities that could result in that vehicle being a bit bigger than that,” executive chairman David Di Pilla said.

Wealthy backers of the company include Mr Di Pilla’s Aurrum Group of investors, alongside former UBS banker Matthew Grounds, and the founders of Spotlight, Chemist Warehouse, and the Besen family. The Oatley family and Aussie Home Loans founder John Symond also backed the HomeCo float.

The company has been busy since listing last October. HomeCo is also proposing one of the country’s first specialist medical services and childcare property based trusts, although this will be unlisted. The company is developing new specialist precincts and already has about $150m of assets.

Mr Di Pilla, a former UBS banker, said HomeCo was on track to execute its strategy and was focused on creating a platform for sustainable long-term growth via its own, develop and manage model.

“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,” he said.

HomeCo said it was 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.

But the company said in light of recent COVID-19 developments, including Melbourne‘s Stage 4 restrictions, it would not provide earnings guidance.

The daily needs trust would own a portfolio of stabilised, convenience based daily needs focused assets targeting consistent, growing distributions. HomeCo would then be positioned as an owner, developer and manager of diversified property investments including the REIT and health fund.

The company beat prospectus forecasts by 14 per cent on Funds From Operations and had 91 per cent cash collection from tenants in July and similar collections expected for August.

HomeCo has grown to $1.2bn of assets under management reflecting 30 per cent growth since it floated last year. Annual like for like foot traffic in its centres was 16 per cent ahead of 2019 in the month of July.

HomeCo provided $5.7m in COVID-19 tenant support during the fourth quarter of fiscal 2020 and is looking to further develop out its portfolio which sits on 1.3 million square metres of land.

Ten pad sites are in development and anticipated to be open in fiscal 2021 and 2022 and development applications for healthcare and wellness centres being worked up.

HomeCo will own a partial stake in the new REIT that will be launched via an in-specie distribution and will raise new capital. It will be skewed to daily needs and health services.