The HomeCo Daily Needs REIT (ASX: HDN) today debuted on the ASX at a 1.5% premium to its initial public offering (IPO) price. The real estate investment trust (REIT) raised $300 million at $1.33 a share. Soon after the float, the HomeCo share price moved to $1.35 but has retreated back to $1.33 at the time of writing.
What assets are included in the HomeCo REIT fund?
HomeCo has been billed as the largest IPO of the year for the ASX. As part of its effort to bring the fund to IPO, HomeCo had been actively acquiring retail shopping mall properties in New South Wales, Victoria, and Queensland.
Since July, it has purchased three shopping centres from Woolworths Group Ltd (ASX: WOW), along with assets in Western Sydney worth $220 million. Overall, it has seeded the fund with 17 malls worth $844 million.
It’s worth noting that the fund has specifically chosen to anchor these properties with major supermarket tenants – hence the name ‘Daily Needs’. It specifically named supermarkets Woolworths and Coles Group Ltd (ASX: COL) as these anchor tenants. More than a quarter of the trust’s rental income will come from Woolworths and Coles leases, with Super Retail Group Ltd (ASX: SUL), Spotlight, IGA and Amart among its other tenants.
HomeCo Daily Needs REIT’s prospectus also said that the portfolio has a 98% occupancy rate, and 8.4 years average lease expiry. It was pitched to investors with 5.5% yield based on FY21 projections, with a total return story of 10% that includes capital gains.
What did management say?
Home Consortium Ltd (ASX: HMC) will retain a 27% stake in the Daily Needs REIT. Home Consortium Chief Executive, David Di Pilla, is well pleased with today’s float saying:
This vehicle has been very carefully constructed. A lot of thought went into it. It’s been diversified by retail sub-sectors, tenants and geography so it should perform under all market conditions. Our rent collections were in the mid 90 per cents during the pandemic. The November rent collection is at 94% and we expect that to get up to 98-99% by the end of the month.
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More reading
- Why BlueScope, Home Consortium, IAG, & Kogan shares are dropping lower
- Could this HomeCo (ASX:HMC) REIT IPO be the biggest in 2020?
Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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