HomeCo Daily Needs REIT lists ahead of expansion push

Investors chasing yield stocks got their first taste of a new property stock on Monday.

HomeCo hit its highest trading price yet on Friday at $4.23 and came back to $3.86 on Monday after the in-specie move.

The lift in supermarket spending has prompted a bump up in the trading of the year’s largest float on the Australian Securities Exchange, the HomeCo Daily Needs REIT.

The new fund, spun out of the listed Home Consortium via an in-specie distribution, also raised $300m via Goldman Sachs and Macquarie Capital, alongside Morgans, Ord Minnett and Jarden.

The stock lifted from its $1.33 per unit float price to $1.34, in line with expectations, as about 27 per cent of the register was held by HomeCo shareholders. Market experts said there was “flow back” as some sold out of the new fund and bought back into HomeCo.

But longer-term themes are favouring the stock which is trading at a discount to peers like BWP Trust, SCA Property Trust and Aventus.

HomeCo executive chairman David Di Pilla expects more copycat vehicles to emerge and says the initial portfolio has been carefully curated, with the company already looking to add to it.

He also argues it has been differentiated from many others and was diversified, enabling it to withstand pressures during the pandemic.

The fund will not look to compete on a cost-of-capital basis but will instead seek to find value-add opportunities. Mr David Di Pilla said the new fund had strong financing lines and would win a premium over time.

The Daily Needs portfolio is now approaching $900m and is focused on centres in strong growth areas which are configured to serving rising demographics in the suburban areas.

These trade areas could be in line for a boost once immigration returns in the wake of the pandemic. They will house more people working locally, boosting the customer base.

Daily Needs REIT boosted its portfolio ahead of listing, agreeing to acquire two Western Sydney neighbourhood centres for about $220m, taking its assets under management to about $800m.

The trust said on Monday it had snapped up the Marsden Park Shopping Centre in Brisbane’s southwest from QIC for $48m.

HomeCo hit its highest trading price yet on Friday at $4.23 and came back to $3.86 on Monday after the in-specie move.

It is switching strategy to become a funds manager, as well as owning former Masters outlets, which it has converted into convenience and lifestyle-based shopping centres.

The company said the Daily Needs centres had performed ahead of listing and had a 19 per cent like-for-like increase in foot traffic in October. Comparable sales at its Woolworths and Coles supermarkets were up 37 per cent in the first quarter.

The company is already on track to boost its firepower to buy more centres in what is emerging as a hot area in property, with its debt facility to be upsized from $400m to $500m so that the fund has liquidity of $215m for developments and acquisitions.

The company said the REIT portfolio’s unadjusted cash collection continued to improve with October running at 96 per cent.