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Elanor Retail Earnings & Profits Drop


Elanor Retail Property Fund announced its annual financial results for the year ended 30 June 2019 with profits and earnings down -12.8% off the back of lower valuation gains and higher fees.

Highlights

  • Statutory net profit for the period of $20.0 million, down 12.8%

  • Core Earnings for the period of $12.2 million (FY18: $14.0 million, down -12.8%), or 9.46 cents per security.

  • Comparative Core Earnings for the period of $14.2 million, after adjusting for rental downtime at Tweed Mall ($0.7 million) and the Manager’s performance fee ($1.3 million).

  • Distributions for the period of $11.6 million, or 8.98 cents per security based on maintaining a 95% payout ratio. Distribution for the six months to 30 June 2019 of 4.33 cents per security.

  • As at 30 June 2019, ERF had a total investment portfolio of $334.5 million, including the Auburn Ambulance Station ($2.5 million).

  • As at 30 June 2019 the portfolio comprises 7 high investment quality retail shopping centres, with a strong focus on non-discretionary retailers, representing 60% of rental income.

  • The Fund has negotiated the early surrender of Auburn Central’s Big W lease to facilitate the transformation of the property into a Sydney metropolitan, dual supermarket, neighbourhood shopping centre. A Heads of Agreement has been executed with a nondiscretionary retailer to anchor the new retail precinct.

  • The Fund has formalised ALDI’s new 15-year lease at Tweed Mall, commencing on 21 August 2019. ALDI’s introduction has facilitated execution of the remix strategy for the northern mall.

  • Gearing of the Fund of 38.8% as at 30 June 2019, within the Group’s target gearing range of between 30% and 40%.

Commenting on the result, ENN CEO, Glenn Willis, said: “The continued growth in the value of ERF is a result of the strong non-discretionary retail focus of the Fund’s investments and the successful execution of the operational and strategic initiatives across the portfolio. We remain confident that the Fund is well positioned to continue to grow value for security holders.”

Overview and strategy

The Fund is focused on high investment neighbourhood and sub-regional shopping centres with an objective to provide investors with strong and growing income returns, and capital growth.

To achieve this objective, the Fund’s strategy is to:

▪ invest in retail properties that provide strong earnings from a diversified retail tenant mix (with a focus on non-discretionary retailers) and high strategic real estate value

▪ implement active leasing and other asset management initiatives to grow income and portfolio value

▪ implement development and repositioning strategies across the portfolio

▪ maintain a conservative and efficient capital structure with a target gearing range of between 30% and 40%

Update on Strategic review

In February 2019, the Fund announced the commencement of a strategic review to examine options and capital management initiatives with a view to reducing the gap between Fund NTA per security and the security trading price. Key actions undertaken as part of the strategic review include:

  • execution of the repositioning initiatives within the Value-Add assets

  • evaluation of the potential realisation strategy for the Value-Add assets

  • evaluation of the potential realisation strategy for the Core Assets

  • evaluation of the potential realisation strategy for the Core Assets and the Value-Add assets to discreet sources of capital as a result of an integrated capital management transaction

The strategic review has identified specific transaction options that are now being further developed with a view to execution, if appropriate, of the preferred option in the short to medium term.

ERF Trading Chart vs ASX200 AREIT Blue - ERF , Purple ASX200 AREIT Last 12 months

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