How Did HomeCo Daily Needs REIT Achieve 4.4 Cents FFO Per Unit in 1H FY26?
HomeCo Daily Needs REIT has reported steady growth in funds from operations for the first half of FY26, supported by strong asset valuations and operational metrics, while reaffirming its full-year guidance.
- 1H FY26 FFO per unit rises to 4.4 cents
- Positive asset revaluations add $219 million gross
- Maintained occupancy and cash collections above 99%
- Completed $87 million in asset disposals at a premium
- Reaffirmed FY26 guidance, 9.0 cents FFO/unit and 8.6 cents DPU
Robust Half-Year Performance
HomeCo Daily Needs REIT (ASX, HDN) has delivered a solid first half for FY26, with funds from operations (FFO) per unit increasing to 4.4 cents, up from 4.3 cents in the same period last year. This growth underscores the resilience of its portfolio, which is strategically positioned across Australia's fastest-growing metropolitan corridors including Sydney, Melbourne, Brisbane, Perth, and Adelaide.
The REIT’s operational performance remains strong, maintaining occupancy and cash rent collections above 99% since its IPO. Comparable net operating income (NOI) grew by 4.0%, while leasing spreads outperformed the market with a 6.2% increase, reflecting the quality of tenants and locations.
Asset Valuations and Capital Management
HomeCo reported positive asset revaluations of $219 million gross ($143 million net), representing a 4.5% uplift on the portfolio value since June 2025. This marks the fourth consecutive period of valuation gains, highlighting the defensive nature of daily needs retail assets and the strength of metropolitan locations.
The REIT also completed $87 million in asset disposals at a 1.6% premium to book value, providing capital flexibility to pursue accretive acquisitions and development opportunities. These disposals align with HomeCo’s disciplined approach to asset recycling, reinvesting proceeds into higher-quality neighbourhood centres and tenant demand-led projects.
Development Pipeline and Financial Position
HomeCo’s development pipeline exceeds $650 million, targeting returns on invested capital (ROIC) above 7%. Active projects worth $100 million are underway, aiming to enhance earnings quality and valuation upside. The REIT’s proforma gearing stands at 34.6%, comfortably within its 30-40% target range, supported by 70.5% interest rate hedging, which provides a buffer against market volatility.
Net tangible assets (NTA) per unit increased by 5.4% to $1.55, reflecting both valuation gains and operational performance. Distributions per unit (DPU) remained steady at 4.3 cents for the half, consistent with the prior year.
Guidance and Outlook
Management reaffirmed FY26 guidance with FFO per unit expected to reach 9.0 cents and distributions at 8.6 cents per unit. CEO Sid Sharma emphasised the REIT’s strong balance sheet and prudent development strategy as key to sustaining income growth. Fund Manager Paul Doherty highlighted the ongoing focus on tenant quality, metropolitan growth corridors, and disciplined capital deployment as pillars of future performance.
As HomeCo continues to navigate a dynamic economic environment, its blend of stable income streams, strategic asset management, and development initiatives position it well to deliver on its growth ambitions.
Bottom Line?
HomeCo’s steady half-year results and reaffirmed guidance signal confidence in its growth strategy amid evolving market conditions.
Questions in the middle?
- How will rising interest rates impact HomeCo’s development pipeline returns?
- What is the timeline and risk profile for the $650 million development pipeline?
- Could further asset disposals accelerate capital recycling and portfolio upgrade?
