At a time when continuing Covid delta infections are worrying shoppers and investors in some listed retailers and their landlords, one new trust is looking to go deeper into the sector.
Securities in the HomeCo Daily Needs (HDN) Trust were placed in a trading halt on Monday so the company could undertake a capital raising to help pay for a series of buys that will widen its retailing footprint.
According to a statement to the ASX, the company is looking to raise $88.3 million via a fully underwritten placement at an issue price of $1.61 a share. That was a skinny 3.6% discount to the HomeCo Daily Needs price last Friday of $1.665.
The company is raising capital to partially fund the acquisition of a 100% interest in six daily needs assets for a total purchase price of $222 million. This represents a weighted average acquisition capitalisation rate of 5.78%
The release explains that these assets have 80% exposure to major national tenants. This includes retailers such as Coles Group, JB Hi-Fi, Spotlight and Super Retail Group Ltd (Super Cheap, Rebel, Macpac and BCF).
HomeCo”s Portfolio Manager, Paul Doherty, said in the ASX release “The acquisitions and placement announced today are consistent with HDN’s strategy to secure high-quality daily needs focused assets which complement our model portfolio and deliver stable and growing distributions.”
“The acquisition properties were all secured off market and offer highly defensive and growing income streams via long-term leases to major national tenants, high occupancy and embedded rental growth through fixed annual rental reviews of 3.3%.
“Furthermore, the assets are strategically located in key growth corridors with low site coverage, which provides further upside potential from future accretive brownfield development.”
HDN reckons the buys will add to earnings this financial year and issued what amounts to a small upgrade less than a month after revealing its 2020-21 annual results.
It says it is now expecting an extra 3% in its Funds From Operations per security for 2021-22.
As a result, it has lifted its distribution guidance from 8 cents a unit to 8.25 a unit.
HDN said the new units will be entitled to the distribution of 2.0 cents a unit which is expected to be declared for the quarter ending September 30, 2021 and will rank equally in all respects with HDN’s existing ordinary units from the date of allotment.