HomeCo Daily Needs REIT : HDN Records Valuation Gains of $209 million

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Managed by

HMC Funds Management Limited

(ACN 105 078 635; AFSL 237257) as responsible entity of the

HomeCo Daily Needs REIT (ARSN 645 086 620)

ASX RELEASE

7 June 2022

HOMECO DAILY NEEDS REIT RECORDS NET VALUATION GAINS OF $209 MILLION AND PROGRESS ON UNLOCKING DEVELOPMENT PIPELINE

Key Highlights

• June 2022 preliminary unaudited net valuation gain of $209m1, a 4.6% increase on December 2021 representing 10cpu of NTA uplift
• Significant progress unlocking and accelerating $500m+ development pipeline with forecast FY23 development commencements increased to $75m (from $60m) at a ~7% target ROIC
• Rent collection maintained at over 99% for the period July 2021 to May 2022
• Leasing spreads of +5% across >103,000sqm GLA since July 2021 underpinning strong rental growth
• Reaffirming FY22 statutory FFO per unit guidance of 8.8 cents
• Distribution of 2.12 cents per unit for the quarter ended 30 June 2022 declared, resulting in a full year FY22 distribution of 8.28 cents per unit

HomeCo Daily Needs REIT (ASX: HDN) CEO Sid Sharma, said: "HDN's high quality and strategic asset base remains well positioned for the higher inflation and interest rate environment we are now facing. The portfolio is in strong shape with 99% rent collection and 99% occupancy, providing a strong platform to drive rental growth and new income streams via development. With more than 77 million total annual customer visits, foot traffic remains robust and increased by 1.4% in the March quarter versus the prior corresponding period."

"The portfolio recorded strong valuation gains highlighting the growing demand for daily needs assets from both private and increasingly, institutional investors. Investors remain attracted to high quality daily needs assets offering defensive income streams underpinned by attractive long-term megatrends. We believe the shift to omni-channel retailing is a long-term structural tailwind which is driving the evolution of our asset base into critical last mile infrastructure."

"We are making significant progress unlocking and accelerating our value accretive $500m+ development pipeline with over 30 projects in various stages of planning. Our FY22 projects are on track and on budget and we are now targeting to commence in excess of $75m of developments in FY23 at a ~7% ROIC. Our Glenmore Park and Mackay projects have received authority approvals for development, have strong customer demand and are in detailed design."

1 Valuation gains based on combined HDN and AVN portfolio and pro forma for $116.2m of acquisitions settled in 2H FY22. Excludes Parafield ROU asset of $10.9m.

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JUNE 2022 PRELIMINARY UNAUDITED PORTFOLIO VALUATION

In accordance with the stated valuation policy of HDN, preliminary unaudited valuations for all 57 properties in the portfolio have been completed. This comprised 32 independent valuations with the remaining 25 properties completed by internal valuation.

The preliminary unaudited portfolio valuation, which remains subject to year-end audit has increased by $235 million (+5.2%) to $4,786 million (from 31 December 2021 to 30 June 2022). Net of capital expenditure incurred during the period of $26 million, this represents a net valuation increase of $209 million (+4.6%).

41% of the net valuation increase was driven by income growth (with the balance from cap rate movement).

Preliminary unaudited portfolio

Independent

Internal

Total

Portfolio

valuations

valuations

WACR

valuation

($m)

($m)

($m)

(%)

# of properties

32

25

57

Pro forma 31 December 2021

$2,047m

$2,505m

$4,551m

5.56%

valuation2

Capital expenditure3

$17m

$9m

$26m

Net valuation increase

$159m

$50m

$209m

30 June 2022 valuation

$2,223m

$2,563m

$4,786m

5.34%

Gross increase

+8.6%

+2.3%

+5.2%

Net increase

+7.8%

+2.0%

+4.6%

DEVELOPMENT UPDATE

With a portfolio spanning 2.6 million square metres of site area, including across Australia's leading metropolitan markets and growth corridors and low average site coverage of only 37%, HDN is uniquely positioned to expand its last mile logistics infrastructure network via accretive development opportunities. HDN's development pipeline remains the optimal use of incremental capital and provides the greatest opportunity to generate enhanced income and NTA growth.

Since the merger with AVN, HDN has undertaken a detailed review of the portfolio to identify priority projects which can commence over the medium-term and increase HDN's annual capital expenditure programme. The development pipeline is now in excess of $500m across 30 projects in various stages of planning. Over $100m of near-term projects now have requisite approvals from planning authorities and we expect to activate approximately $75m of projects in FY23 with a ~7% ungeared ROIC target. Importantly, our projects continue to be tenant led and supported by strong trading conditions for tenants in a post-covid landscape.

Today we provide additional detail on three key projects which are expected to commence in FY23:

• HomeCo Glenmore Park development will add ~2,400m2 of GLA to our existing daily needs town centre and will be anchored by government services, health and wellness tenants. We have received

2 Pro forma for $116.2m of acquisitions settled in 2H FY22. Excludes Parafield ROU asset of $10.9m.

• Balances to 30 June 2022 are unaudited and subject to change. Excludes adjustments relating to straight lining and capitalised management fees.

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leasing commitments for over 75%4 of GLA and requisite planning approval. We expect Glenmore Park to commence construction in Q1 FY23.

• HomeCo Mackay leisure and lifestyle precinct has received planning approval for >17,000m2 of GLA. The precinct complements the existing >14,000m2 large format retail centre and has received over 64%4 leasing commitments from national brands in the leisure and lifestyle categories. We expect Mackay to commence construction in Q1 FY23.
• HomeCo Nowra development has received planning approval for >11,000m2. Tenant demand is strong with over 75%4 leasing commitments from national brands in the wellness, leisure and lifestyle categories. We expect Nowra to commence construction in Q1 FY23 noting that Nowra is an ex- Masters building undergoing conversion.
• Additionally, our minor projects for FY23 are well positioned with >6,000m2 of incremental GLA to be activated.

Activation of HDN's development pipeline remains subject to achieving target financial hurdles, leasing commitments and a delivery plan.

PROPOSED GLENMORE PARK HEALTH, WELLNESS & DAILY NEEDS EXPANSION

• Including signed MOUs.

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PROPOSED GLENMORE PARK HEALTH, WELLNESS & DAILY NEEDS EXPANSION

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PROPOSED MACKAY LIFESTYLE AND LEISURE EXPANSION

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