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HomeCo Daily Needs REIT (ASX:HDN) to raise capital for six acquisitions

Real Estate, The Market Online Deal Room
ASX:HDN      MCAP $2.570B
13 September 2021 15:00 (AEDT)

HomeCo Hawthorne. Source: HomeCo

The ever acquisitive HomeCo Daily Needs REIT (HDN) has announced another equity raising to acquire six properties as it ups its guidance.

HDN announced plans to acquire six ‘daily needs’ assets for a total of $222 million representing a weighted average acquisition capitalisation rate of 5.78 per cent.

HDN is launching a fully underwritten placement to raise $88.3 million at $1.61 per new share.

The acquisitions and associated transaction expenses will be largely funded by this raise, with the remainder to be funded by debt.

Two neighbourhood shopping centres are a part of the acquisitions, alongside Armstrong Creek Dan Murphy’s and Quick Service Restaurants, next to the shopping centre HDN acquired in April.

In Queensland, a Hungry Jacks is on the cards, located between HomeCo Coomera City Centre and HomeCo Upper Coomera.

Rounding off the acquisitions are two HomeCo long format retail assets in New South Wales which are being acquired at a 16.8 per cent discount.

HDN fund portfolio manager Paul Doherty said the acquisitions and placement announced today were consistent with HDN’s strategy to secure high-quality daily needs focused assets that complemented its 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%,” Mr Doherty said.

“Furthermore, the assets are strategically located in key growth corridors with low site coverage, which provides further upside potential from future accretive brownfield development.”

The $88.3 million placement fully underwritten by Goldman Sachs and Jefferies Financial Group issue price of $1.61 represents a 3.3 per cent discount on the last close price of $1.665.

From the date of allocation, the new units will be entitled to a distribution of two cents per unit, which is scheduled to be announced for the quarter ending September 30, 2021. These will rank equally with HDN’s existing ordinary units in all respects.

The acquisitions and placement are anticipated to be accretive three per cent FY22 FFO/unit and with the FY22 DPU guidance upgraded from eight cents to 8.25 cents.

HDN also announced the establishment of a distribution reinvestment plan (DRP). For the non-underwritten September 21 DRP, Home Consortium (HMC) has committed to participate in its 24.1 per cent pro-rata share of the distribution.

HMC has also agreed to underwrite 100 per cent of fully paid ordinary units under the DRP in relation to the December 21, March and June 22 distributions, subject to unitholder approval.

Shares in HDN are in a trading halt, sitting at $1.67

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