![Aventus Retail Property Fund settled the $336 million Castle Hill deal in July.](http://web.archive.org./web/20170812081526/http://www.afr.com/content/dam/images/g/w/g/7/1/g/image.related.afrArticleLead.620x350.gxt3h8.png/1502351371493.jpg)
The Aventus Retail Property Fund, defied the gloom spreading across retailing and retail property with a record year of leasing activity as it lifted occupancy rates to 98.7 per cent across its $1.8 billion-strong portfolio of 22 homemaker centres.
Backed by retail billionaire and co-founder Brett Blundy, Aventus negotiated 133 leasing deals covering 107,000 square metres of lettable area over the past financial year, a 50 per cent increase on the prior year, with leasing spreads positive and incentives low.
It also announced plans to double its development spending to $50 million across 17 projects and said it would look to sell off some of its smaller centres that had little development upside as part of plans to reduce gearing below 39 per cent.
Chief executive Darren Holland said sales across the $67 billion-a-year large format sector were "moderating off cyclical highs" as the housing market slowed but were still outperforming traditional retailing, though the gap was closing.
"We see a normalisation of retail sales growth going forward," Mr Holland told The Australian Financial Review.
Over fiscal 2017, rental income rose by 3 per cent as Aventus delivered funds from operations of $71 million (or 17.7¢ per unit) in line with guidance. Its full-year distribution of 15.9¢ per unit was at the bottom end of FY16 guidance of 15.8-16.2¢ per unit.
Forecasts for FY18 was for FFO growth of 2 to 4 per cent.
Mr Holland said the growth of online retailing and the arrival of Amazon would impact the large format retail sector, but to a lesser degree than it would traditional bricks and mortar retail landlords.
"There have been something like 800 store closures as a result of administrations, but we've not had a single store close due to administration. We don't have the exposure.
"We have no department stores in our portfolio, no large format supermarkets or discount department stores and fashion apparel (where the bulk of retail collapses have occurred) make up less than two per cent of our tenant mix," said Mr Holland.
Major acquisitions
Over the year, Aventus snapped up the Castle Hill Super Centre and Marsden Park Home centre in western Sydney for $440 million to put it within striking distance of Harvey Norman as the nation's biggest homemaker centre landlord.
It also increased its exposure to non-household goods retailers, which now account for 34 per cent of its tenant mix (compared with an industry average of 27 per cent) and 37 per cent of its income, securing its first Australia Post tenancy, alongside leases to three day spas, three childcare centres and a nail bar.
Mr Holland said the fund would continue to push for more flexible zoning in NSW and other states to allow it to continue to diversify its tenant mix.
In a mostly positive note, Macquarie analyst Rob Freeman highlighted that weighted average lease expiry (WALE) across the Aventus portfolio had increased to 4.2 years, going against the trend of other retail REITS.
Grant McCasker from UBS wrote that "operationally Aventus continue to deliver as they progress asset enhancement strategies and housing-related retail sales currently remain strong".
However, he warned that Aventus faced increasing risk with "63 per cent of its income exposed to housing-related spending".
Aventus shares ended Thursday down 3 per cent at $2.29.