Stable rental income is meeting a more expensive funding environment at HomeCo Daily Needs REIT. HomeCo Daily Needs REIT (ASX:HDN) reported higher FY26 funds from operations and maintained strong portfolio occupancy, but its refinancing programme and softer FY27 Earnings guidance bring borrowing costs into sharper focus.

The FY26 numbers

For the year to 30 June 2026, HDN reported Funds From Operations (FFO) of A$187.1 million, or 9.0 cents per unit, against 8.8 cents a year earlier. Distributions were 8.6 cents per unit, up from 8.5 cents, paid at 2.15 cents a quarter. Both figures matched the guidance the trust had reaffirmed on 16 June 2026.

Statutory profit was A$361.6 million, up from A$250.3 million, helped by a A$188.8 million net Fair Value gain. Because that gain is a Revaluation rather than cash, FFO is the better guide to what the portfolio actually earned. Revenue from ordinary activities was A$379.4 million, of which rental income was A$306.7 million.

Net tangible assets (NTA) were A$1.56 per unit, up from A$1.47. Gearing was 35.7%, inside the trust’s 30% to 40% target range and slightly above 35.2% a year earlier.

What the portfolio looks like

HDN owns 46 daily needs assets across Australia, valued at A$5,092.5 million in the financial report. The company describes the assets as spanning Sydney, Melbourne, Brisbane, Perth and Adelaide, with a focus on daily needs tenants.

Operating metrics were consistent with that thesis. Occupancy has been held at 99% since IPO,. Comparable property net Operating Income grew 4.0%, and leasing spreads on new leases and renewals were 5.9%.

The weighted average Capitalisation rate was 5.5%, compared with 5.6% a year earlier. A preliminary update on 16 June put the rate at 5.53%, marginally higher than 5.51% at December 2025, so the year’s valuation gain owed more to rental growth and the earlier tightening than to any recent move in yields.

Capital recycling and development

HDN bought A$81 million of assets, targeting an internal rate of return above 10%, and sold A$168 million at a 5.25% exit capitalisation rate, which the company said was a 1.6% premium to book value. Sales at or above Book Value are a useful, if limited, data point, because they test independent buyers’ pricing against the trust’s own valuations.

Development is the other lever. About A$120 million of projects are active, with a targeted return on invested capital of around 7% or more, and management has identified a pipeline of more than A$650 million. Those returns are targets, not outcomes, and they depend on construction costs, leasing and timing.

Risks and things to watch

Refinancing: The A$800 million bridge Facility matures in June 2027, with a one-year extension option. How and at what Margin it is refinanced matters for FY28 earnings.