Dear Investor, On behalf of the Board of Directors, we are pleased to invite you to become a securityholder in Home Consortium Limited and Home Consortium Developments Limited (“HomeCo” or the “Group”). HomeCo was established in 2017 when a consortium of investors comprised of some of Australia’s leading property development and retail organisations acquired the former Masters Home Improvement real estate portfolio from Woolworths. The shareholders behind the 2017 acquisition (collectively known as the “Foundation Securityholders”) include the Spotlight, Chemist Warehouse, Primewest and Aurrum groups. Importantly, there will be no sell down of securities by the Foundation Securityholders at the time of the Offer and in fact a number of Foundation Securityholders are looking to increase their investment into the Group, including through the Offer. By the end of 2019, HomeCo’s portfolio will consist of 21 operating retail and services centres (“Operating Portfolio”) and a further 9 centres to be redeveloped (“Development Portfolio”) across four states (VIC, QLD, NSW and WA). HomeCo’s centres are built around a strategy of national retailers and service providers and delivers hyper-convenience for customers (refer to Section 2.3.2 for details). The Portfolio fair value as at 30 September 2019 is $925 million.11 Key attributes of HomeCo’s portfolio include: • substantial land holding of approximately 1.14 million sqm, with two thirds of the Portfolio located in the growth corridor suburbs of Brisbane, Sydney, Melbourne and Perth, and the balance in major regional centres; • approximately 370,000 sqm12 of gross lettable area, which represents a site coverage ratio of just 32% and provides future expansion opportunities; • approximately 12,00012 free on grade car parking spaces, which should deliver our customers a convenient experience when visiting HomeCo centres; • stable and secure source of rental income underpinned by leases to national tenants (84%13) and public companies (30%13); and • a long Weighted Average Lease Expiry (“WALE”) of 8.8 years14. HomeCo has positioned the rent it charges tenants competitively relative to other landlords leading to significant new leasing activity over the last two years and 93.5% occupancy across our 21 operating centres. In a world moving through structural change driven by the emergence and growth of ecommerce platforms, HomeCo’s tenant mix and competitive cost of doing business is expected to uniquely support the Group to flourish in the future. HomeCo’s strategy of owning, developing and managing hyper-convenience focused retail and services assets aims to provide Securityholders with above average risk-adjusted returns through a combination of regular dividend income and capital growth. Importantly, as HomeCo is internally managed, all the benefits accrue to Securityholders. HomeCo is forecasting a fully franked dividend yield of 6%15 (annualised) for the period from Completion to 30 June 2020. Our growth outlook in funds from operations (“FFO”) per Security and dividends will be underpinned by mainly fixed rental reviews in our leases, future income from centres to be redeveloped and organic growth opportunities within the underlying asset portfolio. As the 9 assets in the Development Portfolio are completed, HomeCo is expected to realise growth in rental income and development profits which is expected to result in future growth in NTA per Security. The Group will maintain a capital structure with a target Gearing range of 30% to 40% and initial Gearing of 31.8% at Completion.
A key risk which investors face when deciding to invest in any Company is determining the quality of board and management, and whether they have confidence that decisions are made in the best interests of generating securityholder value. The Board of the Stapled Entities will have a total of six Directors, comprised of three representatives of the Foundation Securityholders and three newly appointed Independent Non-Executive Directors. The Board has a broad range of skills and experience enabling it to represent the interests of all Securityholders. The three Independent Non-Executive Directors are highly experienced leaders from their respective fields and will bring their own unique insights to the Group. The Group will benefit from a strong alignment of interests between the Foundation Securityholders and new investors under the Offer. The Foundation Securityholders will not dispose of any Securities as part of the Offer and are expected, to have interests in 59% of the Group following Completion. The Foundation Securityholders will also enter into voluntary escrow arrangements which prevent them from disposing any Securities held by them prior to Completion (representing approximately 47% of the Securities on issue) for two years from Completion. Further detail is available in Section 7.4.4. Following careful consideration, the Board considers it is appropriate for David Di Pilla to remain as Executive Chairman and therefore combine the role of Chairman and CEO. This was done in order to maintain the momentum of a business that has achieved so much in just two years and to maintain continuity and focus as HomeCo transitions to a publicly listed group. David takes his responsibilities in this role very seriously and will ensure that HomeCo maintains strong governance standards and that we always act in the best interests of all Securityholders. Chris Saxon will act as Deputy Chairman and lead independent Director and provide his significant legal and governance experience to the role. The Group is offering 97.0 million Securities at the Offer Price of $3.35 per Security. An application will be made for admission of the Stapled Entities to the official list of ASX and the quotation of Securities on the ASX. This Prospectus contains important information regarding the Offer and HomeCo’s operations, financial performance and forecasts. We encourage you to read it carefully and in its entirety, including Sections 8 and 9 which set out key details of the Offer and outlines the risks associated with an investment in HomeCo. If you have any questions you should consult your accountant, stockbroker, lawyer or other professional adviser before making an investment decision. On behalf of the Board, we thank you for considering an investment in HomeCo and look forward to welcoming you as a Securityholder.
David Di Pilla
Executive Chairman and Chief Executive Officer
Deputy Chairman and Lead Independent Director