HomeCo Daily Needs REIT kicks off $265m equity raising for Home Consortium retail assets

A new real estate investment trust has launched a $265m equity raising to buy seven large format retail assets from its parent company.

A retail investment trust created just last year has launched an ­equity raising to buy seven assets from its parent company.

HomeCo Daily Needs REIT — which was spun-out of David Di Pilla’s Home Consortium at the end of 2020 — launched the $265m raising on Monday for the large-format retail assets in NSW, Victoria and Queensland.

HDN REIT’s independent non-executive chair Simon Shakesheff said the equity raising built on the trust’s strong growth trajectory since its initial public offering in November.

“The proposed acquisitions and equity raising substantially improve the quality and scale of HDN’s portfolio and are expected to deliver FFO (funds from operations) accretion and reduced gearing,” he said.

“The proposed transaction demonstrates the strong alignment of interests with Home Consortium, HDN’s largest unitholder and manager.”

The properties are at Marsden Park in NSW, Box Hill and South Morang in Victoria and Bundall, Mackay, Toowoomba South and Upper Coomera in Queensland and they will be purchased for $266.4m at a 6.75 per cent weighted average cap rate.

The properties are 99 per cent occupied with an average weighted lease expiry of six and a half years.

The deal was struck at a 6 per cent discount to the June 30, 2021 book value.

The raising was structured as an underwritten one-for-2.36 ­accelerated non-renounceable entitlement offer, and was being handled by Goldman Sachs. The offer was priced at $1.295. The expected settlement is in July 2021 following a unitholder vote.

The sale of the portfolio continues Home Consortium’s (HMC) transition towards a capital light fund manager with significant financial capacity to recycle capital and grow funds under management.

This move will reduce HMC’s gearing to zero and accelerate the growth of its proposed HealthCo fund and the broader funds platform.

Mr Di Pilla said the company continued to execute on its strategy to unlock value and growth through capital recycling.

“Importantly, our actions today clearly demonstrate the strong alignment between HMC and HDN and our ability to create value for investors across our platform,” he said.

HMC reaffirmed 2020-2021 FFO guidance of no less than $35m, as well as its dividend guidance of 12c per security.

HDN also announced it would separately buy the newly built Coles-anchored Armstrong Creek Town Centre in Geelong, Victoria, for $55.6m, representing a cap rate of 6 per cent.

Developed by Melbourne-based Wel.Co, the neighbourhood centre opened for trade in September last year.