REIT IPO priced with attractive dividend yield

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Aventus Property REIT is an owner of large format retail centres in Australia. The Fund owns 14 properties with 12 based on the east coast. Large format retail has been trading strongly as the wealth effect has seen household goods sales outperform, underpinning occupancy at 98% and ensuring favorable rental growth. The IPO proceeds are being used to pay down debt for growth purposes with no vendor sell down. This will leave CEO Darren Holland $100m of capacity to further consolidate the very fragmented large format retail space and execute on a development pipeline, both of which will provide material accretion to earnings. With a weighted average cap rate of 8% there is further room for organic capital appreciation as well. As REITS are out of favor at the moment this has ensured the IPO is priced at an attractive 7.25% dividend yield. When this is combined with its above peer group dividend growth, Aventus should outperform the sector.


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