HomeCo buys Queensland shopping centre for $160 million
HomeCo Daily Needs REIT has signalled the market for larger shopping centres is reopening by snapping up Town Centre Victoria Point in Queensland for $160 million and undertaking a major placement.
The trust is one of a fleet of buyers that are stepping up from smaller neighbourhood centres into larger assets as they gain confidence in the retail recovery.
The group picked up Town Centre Victoria Point on a fully leased yield of 4.75% from a private family and it fits in with the trust’s model portfolio.
JLL agents Nick Willis and Sam Hatcher brokered the sale for a private group.
“Following what has been a relatively supply constrained start to 2021, we have experienced a significant increase in transaction activity in recent months, with our team brokering over $1 billion of comparable shopping centres. This activity reinforces the growing investor confidence for larger scale retail assets in the Australian market,” Mr Willis said.
“We are continuing to experience strong investor demand for assets that have demonstrated robust income streams over the last 24 months and diversification in the non-discretionary and service based sectors,” he added.
The Queensland asset has been virtually unscathed from lockdowns and fund portfolio manager Paul Doherty said it was anchored by high quality, strongly performing tenants on long-term leases with attractive organic growth.
“In addition, the property offers significant long-term potential to drive enhanced returns through development by capitalising on the property’s significant expansion potential,” he said.
The centre is anchored by national and listed tenants including Woolworths, Bunnings, Healius and Endeavour Group. The large-scale 7.6ha asset has low site coverage of 27% and has significant development upside.
The trust undertook an underwritten institutional placement to raise $70 million at a price of $1.45 per unit, via Macquarie Capital.
The acquisition is immediately accretive to the previous fiscal 2022 Funds From Operations guidance of 8.3c per unit. Once the raising is done, balance sheet gearing is expected to be at the midpoint of target 30-40% gearing range post-transaction.
The purchase will also give the fund an increased potential for inclusion in both the S&P/ASX 300 Index and global indices.
The fund has now hit a portfolio of more than $1.5 billion.
“While the yield struck appears tight relative to recent transactions, we believe the transaction is consistent with [the trust’s] metro and convenience centre strategy, appears attractive in isolation relative to comparable transactions of this nature,” Jarden analysts said.
They said the transaction looked marginally accretive in isolation but assuming an active transaction pipeline continues in fiscal 2022, “we believe on balance there is upside risk to these numbers as it pushes towards potential index inclusion”.
This article first appeared on www.theaustralian.com.au/business/property.