Investment Matters

Company News: HomeCo and Garda Property Fund (Property Sub-Portfolio).

Property Securities Portfolio

HomeCo Daily Needs REIT (Neutral impact)

HomeCo provided an update for the first half.

Funds from operations per unit (operating income per unit) are tracking slightly ahead of prospectus with early settlements of properties while the trust continues to expect a 4.2 cents per unit distribution (a 3.15% distribution yield).

We like the Daily Needs REIT for its blue-chip tenant mix, which includes the likes of Woolworths, Coles, Bunnings and Officeworks. This is in addition to its relatively affordable (average gross rent of $330/sqm) and large sites which have the potential for brownfield expansion (expansion of existing sites).

These resilient economics were reflected in its result: trading occupancy remains high (96.7%) and almost 100% of rent has been collected November to January.

The company is undergoing several developments (two of which are pre-leased) which will see an above market cash yield upon leasing (~7%), along with good brownfield expansions that should see favourable cash return on investment (~10%+).

consortium

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Garda Property Fund (Neutral impact)

Garda Property fund holds a mix of Industrial and Office properties. We like Garda because it is an opportunistic property manager, which invests in a mix of debt and equity property investments.

Recently Garda has looked to grow its assets by building and expanding sites, which allows it to earn a favourable yield on cost rather than acquiring assets. We see this as a positive in an environment where high prices are being paid for assets underpinned by low interest rates.

The company has continued its trend over the past 6 years of expanding its exposure to industrial assets.

Garda 

Garda currently forecasts a 6.1% distribution yield in 2021, which is significantly higher than the broader listed property sector and continues to make progress in leasing and developments.

This week's results presentation, provided a pleasing update:

  • Some progress on the leasing of Botanica 9, and expectation for non-CBD campus style office demand to be more resilient than other options post-COVID.
  • Re-leasing continues to be strong industrial.
  • Providing additional evidence of their preference to trade assets to support their development pipeline, the company now has three non-core assets presently for sale. We prefer this “active” style of management and see it as a significant point of differentiation to other REITs.
  • Evidence of valuation support with the stock currently trading at a small moderate discount to Net Assets Value.

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The above market commentary represents the views and opinions of First Samuel Pty Ltd. Such market commentary contains information of a general nature only. Such market commentary is not intended to provide a sufficient basis on which to make any investment decision and should not be taken as such. It has not taken into consideration your objectives, needs or financial situation. Before making decisions in relation to any financial product, you should always obtain and read any relevant Product Disclosure Statement or information statement and seek personal financial advice.