HomeCo Daily Needs REIT books +$92 million valuation gains

About HomeCo Daily Needs REIT

HomeCo Daily Needs REIT (ASX: HDN) is an Australian real estate investment trust managed by HMC Funds Management Limited, part of HMC Capital, with a mandate to invest in convenience-based assets across three target sub-sectors: Neighbourhood Retail, Large Format Retail, and Health & Services. The trust listed on the ASX in November 2020 with around $844 million of assets, and in March 2022 completed a transformational merger with Aventus Group to become Australia’s leading daily needs REIT. Today it holds total assets of approximately $5.2 billion spanning 2.3 million square metres of land across Australia’s major metropolitan growth corridors of Sydney, Melbourne, Brisbane, Perth and Adelaide.

Portfolio revaluation

In line with its stated valuation policy, HDN completed preliminary unaudited valuations for all 46 owned properties in the portfolio. This comprised 19 independent valuations representing 35% of the portfolio by value, with the remaining 27 properties valued internally. The preliminary unaudited portfolio valuation increased by $92 million, or 1.8%, to $5,187 million compared with 31 December 2025.

After capital expenditure of $48 million incurred during the period, the net valuation increase was $44 million, or 0.9%. Independently valued assets rose from $1,812 million to $1,840 million, while internally valued assets increased from $3,283 million to $3,347 million. The portfolio weighted average capitalisation rate moved marginally from 5.51% to 5.53%, meaning the uplift was achieved through net operating income growth and accretive, tenant-led developments rather than tightening capitalisation rates.

Fund Manager Paul Doherty said HDN had now recorded positive net revaluation gains for the fifth consecutive period, supported by income growth and developments that are delivering incremental net operating income and valuation gains.

Distributions and guidance

The Responsible Entity declared a distribution of 2.15 cents per unit for the quarter from 1 April to 30 June 2026. The Distribution Reinvestment Plan has been activated for the quarter with no discount applied. Key dates include an ex-distribution date of 29 June 2026, a record date of 30 June 2026, and payment on or about 21 August 2026.

The trust reaffirmed its FY26 guidance of 9.0 cents of funds from operations per unit and 8.6 cents of distributions per unit. The reaffirmation reflects the resilience of HDN’s income, which is underpinned by a non-discretionary, daily needs tenant base and high-quality covenants across leading national retailers.

Balance sheet and hedging

HDN maintained a strong balance sheet, with gearing sitting at the midpoint of its 30–40% target range on a pro forma basis for the unaudited net valuation impact at 30 June 2026. During the period, the trust extended its interest rate hedge coverage to 60% through to June 2027, based on drawn debt as at 31 December 2025, providing greater certainty over financing costs in a higher-rate environment.

The combination of a mid-range gearing position and increased hedge coverage is intended to support the stability of distributions and give the trust flexibility to continue funding its development pipeline.

Operational performance and portfolio quality

HDN highlighted what it described as industry-leading operational performance, with portfolio occupancy and rent collection both above 99%. The trust attributes this to the defensive characteristics of daily needs retail, where income is anchored by essential, non-discretionary spending and exposure to Australia’s fastest-growing metropolitan areas.

Mr Doherty noted that investor demand for daily needs retail property remains strong, with investors drawn to the secure investment fundamentals underpinned by the non-discretionary focus of the income and high-quality tenant covenants. Tenant-led developments continue to play a central role in the trust’s strategy, adding net operating income and contributing to the valuation gains recorded over recent periods, while a disciplined approach to capital deployment supports returns.

Strategic positioning

Beyond its directly owned portfolio, HDN is a strategic investor in a number of HMC Capital vehicles, including HMC Last Mile Logistics, the HMC Unlisted Grocery Fund and the HMC Australian Retail Partnership. These interests broaden the trust’s exposure to convenience-based and last-mile assets, complementing its core neighbourhood retail, large format retail and health and services holdings.

The strategy reflects HDN’s objective of providing unitholders with consistent and growing distributions, supported by a portfolio positioned in metropolitan growth corridors and aligned to structural demand for daily needs retail and logistics.

Conclusion

The June 2026 update reinforces the defensive, income-led nature of HomeCo Daily Needs REIT, with a fifth straight period of valuation gains driven by net operating income growth and development activity rather than market-driven cap-rate movements. With guidance reaffirmed, gearing held at the midpoint of its target range and hedging extended, the trust enters the new financial year well positioned, although future outcomes will remain subject to interest rate movements, valuation conditions and broader market factors.