The Home Consortium Ltd (ASX: HMC) (HomeCo) share price is edging higher today. At the time of writing, shares in the diversified landlord are swapping hands for $4.65. That's up 2.42%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is 0.28% higher.
HomeCo comes into focus after the company announced $133 million worth of property acquisitions to seed its soon-to-be real estate investment trust (REIT), HealthCo.
Let's take a closer look at today's news and what it means for the HomeCo share price.
What's affecting the HomeCo share price today?
In its statement, HomeCo advised it has purchased 3 properties for HealthCo at a combined value of $133.2 million. The includes $110 million for the purchase of a "health hub" in Morayfield on Queensland's Sunshine Coast. The remaining $23.2 million is for the purchase of two childcare centres, one in Brisbane and one in Sydney.
HealthCo's total portfolio value is currently $480 million with another $300 million worth of properties under due diligence.
Last month, HomeCo said it was doubling the equity raise for the proposed trust to $1 billion. The company expects HealthCo to be established by the first half of FY22.
Judging by the HomeCo share price lift, it appears that investors welcome today's news.
Morayfield Health Hub
HomeCo says the $110 million purchase price for the Morayfield Health Hub represents a capitalisation rate of 5.4%. Services at the property include a GP clinic, pharmacy, radiologist, and allied health services. There are also childcare services at the centre.
The sale will only be approved when the vendor's unitholders vote to approve it.
According to the company, the Sunshine Coast is one of the fastest growing regions in Australia. In 2020, the population of the region grew 1.64%, national growth was only 0.9%.
Childcare centres
HomeCo is also purchasing childcare centres in Brisbane and Sydney for the HealthCo portfolio. The Brisbane centre is located 3km from the CBD in Woolloongabba and was purchased for $13 million. The purchase price reflects a capitalisation rate of 5.5%. Childcare provider Busy Bees is the current tenant at the property.
The other centre is located in Five Dock, a suburb in Sydney's Inner West. The sale should settle at the end of this month for a price of $10.2 million, which reflects a capitalisation rate of 5.5% as well. The current tenet is G8 Education Ltd (ASX: GEM) subsidiary, Greenwood.
Property sales
As well as acquisitions, HomeCo announced a number of property sales. In Morayfield, HomeCo sold a shopping centre for $28.4 million. The company says this figure is 3.5% higher than the property's book value on 31 December 2020. HomeCo previously announced the sale of a shopping centre in Bathurst, NSW for $17 million.
HomeCo's direct ownership of shopping complexes has dropped to $154.6 million. In its statement, the company says it will continue to look at asset recycling opportunities, to "deliver optimum long term security holder returns".
Management commentary
HomeCo managing director and CEO David Di Pilla said:
We remain on track to establish HealthCo later this year and today's update further demonstrates our ability to source high quality assets which are well suited to the model portfolio strategy we announced last month for HealthCo.
Pleasingly, we continue to execute our strategy in a capital efficient manner through active capital recycling. Our balance sheet is well capitalised with minimal debt, providing us with significant capacity to secure additional assets for HealthCo including several which are currently under due diligence.
HomeCo share price snapshot
Over the past 12 months, the HomeCo share price has increased 87.2%. Since hitting its record high of $5.25 at the end of April this year, the value of the company's shares has fallen 12%.
Home Consortium has a market capitalisation of around $1.3 billion.
