Billionaire investor John Van Lieshout has taken advantage of listed mall landlord HomeCo Daily Needs REIT’s move to strengthen its balance sheet in the face of rising borrowing costs, to make his first retail investment in six years.
Mr Van Lieshout’s JVL Investment Group paid $140 million for the HomeCo Sunshine large-format centre in Maroochydore, after the listed trust deemed it a “non-core” asset.
The surprise divestment came as HDN – the ticker the trust trades under – joined other listed real estate investment trusts by forecasting lower earnings this financial year due to rising borrowing costs. The weaker financial outlook came as HDN reported strong operating metrics across its business including a 99 per cent occupancy rate, and after it beat its earnings guidance in fiscal 2022.
The trust, whose portfolio more than doubled in size to $4.6 billion when it merged with Brett Blundy’s Aventus Group in March, guided that funds from operations – the key earnings metric for REITs – would be 8.6¢ per unit this financial year, down from 8.85¢ delivered in fiscal 2022.
HDN’s distribution was forecast to be flat at 8.3¢ per unit this financial year, after HDN bumped up the payout ratio to 97 per cent.
The sale of the “non-core” Maroochydore mall at a 6 per cent premium to its December book value will reduce HDN’s gearing to 30.6 per cent, at the bottom end of its target range, whilst increasing its interest rate hedging to 73.5 per cent once debt associated with the asset is paid off.
HDN CEO Sid Sharma told analysts on Thursday the trust had proactively managed its balance sheet to “protect our capital position and flexibility” through the sale of the Sunshine Coast mall.
The sale on a cap rate of 5.4 per cent was brokered by Sam Hatcher and Nick Willis of JLL.
For Mr Van Lieshout, the acquisition of Sunshine Coast Home will give his retail-focused JVL Investment Group a 20th large-format retail centre and ninth in South East Queensland.
JVL Investment head of operations Hamish Wehl said the company had signed an unconditional contract to acquire the asset.
“The asset will be a long-term hold in a market where we have confidence in the future growth. JVL Investment Group is pleased to increase its exposure to the Sunshine Coast market where it owns Noosa Seahaven Resort and other commercial property assets,” Mr Wehl said.
David Tormey, JVL’s head of property, said the asset complements the group’s existing property portfolio and adds to other Sunshine Coast holdings including Home Central Kawana.
The acquisition is the first since JVL’s 2016 purchase of the Cannon Hill Homemaker Centre for $30 million and the Kessels Court Homemaker Centre the prior year, for a similar amount.
Mr Van Lieshout will know the Sunshine Coast mall’s anchor tenant, Amart Furniture well. It’s a business he founded in 1970 before selling it to Ironbridge Capital for about $500 million in 2006.
The Brisbane-based billionaire is ranked the 41st richest Australian on the 2022 Financial Review Rich List, with an estimated $2.68 billion fortune.
HDN’s surprise divestment was “praised” by analyst Grant McCasker of UBS, who said it highlighted “the strong increased alignment of interest between [fund manager] HMC [Capital] and HDN relative to other externally managed vehicles”.
“The investment thesis for HDN is solid – low site coverage of assets in strategic metro locations with the added benefit where tenants can implement last mile fulfilment,” Mr McCasker said.
Mr Sharma said the expanded HDN portfolio had performed very well over the prior financial year.
“We’ve maintained high occupancy, high cash collection, strong leasing spreads and strong comparable net operating income … importantly, our tenants have also performed strongly,” he said.
He added that HDN was also making solid progress on its $500million-plus development pipeline.
“We successfully delivered $37 million of developments in FY22, and we are on track to activate over $75m of developments in FY23,” Mr Sharma said.
Article source: www.commercialrealestate.com.au
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