More deals are in the pipeline for the APN Convenience Retail REIT, which announced two more service station acquisitions funded by a $50 million equity raising, and said others would follow.
Growth has been a constant theme for the real estate investment trust, which owns and leases out service stations in all mainland Australian states, more than half of them in Queensland.
Since listing in mid-2017, the value of its assets under management has grown from $287 million to $633 million across 98 properties on June 30.
Its asset value will reach $738 million by the end of September, when a further 11 service station purchases will have settled and be added to the portfolio.
Through the 2020-21 financial year AQR bought 24 assets for $184 million at a capitalisation rate of 5.94 per cent with weighted average lease expiry of 12.9 years.
Fund manager Chris Brockett said net property income rose 26.1 per cent to $33.2 million in the financial year ended on June 30 and net profit reached $30 million, a rise of 31 per cent.
Like-for-like rental growth rose 2.8 per cent while funds from operations per security rose 1.4 per cent.
One of the great benefits of this asset class is that the majority of tenants are very well capitalised.
— Chris Brockett, APN Convenience Retail
Mr Brockett said the asset class had proved resilient through COVID-19 despite lower fuel sales because of lockdowns.
“We’ve weathered the storm, the asset class is resilient,” he said.
“It helped right from the outset that service stations would remain open as essential services during lockdowns.
“Also, one of the great benefits of this asset class is that the majority of tenants are very well capitalised national and international operators – you’re dealing with tenants like BP, Ampol, Caltex and Chevron.
“They’re capable of weathering a little bit of disruption.”
He said the latest equity raising, underwritten by MA Moelis Australia Advisory, was made up of $45 million through institutional placement and $5 million through a security holder purchase plan.
The funds will be used to settle on the $28.6 million purchase of two Queensland service stations, bought on an initial yield of 5.8 per cent, with the balance used to reduce debt.
At the same time, the group will increase its debt facility from $255 million to $325 million, adding to its buying firepower.
“We’ve constantly got a track record over the last three years of acquiring property, and there’s no reason that won’t continue into FY22,” Mr Brockett said.
“We have a healthy pipeline of opportunities and this should provide further earnings upside on top of our guidance [because] we’ve already got the equity.”
Looking ahead, Mr Brockett forecast a 4.6 per cent increase in distributions to 22.9¢ a security for the current financial year.
Extracted from AFR