Charter Hall Retail REIT is looking at a range of capital management tools to deploy cash at a time when the supply of regional and neighbourhood centres is tightening.
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These could range from a share buy to an equity return to investors, but only if cash cannot be deployed into new acquisitions.
It comes as its major tenants, being Wesfarmer's Coles and Woolworths supermarkets, have shown some strength and the Aldi chain has also increased its presence and is now the eighth tenant in the portfolio in term of base rent paid.
Charter Hall Retail's chief executive Scott Dundas said a buy back or equity return, if they occur, "are both equivalent to buying more of an improved residual portfolio and therefore increasing the growth from it".
"Consistent with our strategy, sale proceeds from divestments will be allocated to optimise returns via acquisitions, development, buy back or return of capital. We continue to re-weight the portfolio towards larger non-discretionary focused assets in metro or commuter metro based locations. We believe this will position the portfolio to optimise long-term growth prospects."
Mr Dundas told investors at the results briefing that it was seen as "very timely" to be looking at other capital management strategies.
"It is getting increasingly difficult to execute on acquisitions and in an event that we can't do that in a timely manner, then the board will look at other strategies such as buy backs or a return on equity," Mr Dundas said.
Overall, the trust reported a statutory profit for the half year ending December 31, 2016, of $178.9 million, a 71.4 per cent increase from prior corresponding period's $104.4 million, which included asset sales, divestments and revaluations.
Stripping out the one-off items, the half year operating earnings of $61.7 million, a rise of 4.8 per cent from $58.9 million, were 15.21¢ per unit, a 0.2 per cent increase from the previous year.
The interim distribution was 14.1¢ cents per unit, up 0.7 per cent from the previous corresponding period. The group's full year guidance for operating earnings is expected to be 30.4¢ per unit.
The results were in line with analyst expectations. In response to analyst questions and speculation following SCA Property's disclosure of its 4.9 per cent interest in Charter Hall Retail, Mr Dundas said there had been no engagement with SCA Property regarding any potential takeover or merger proposals.
Overall net operating income growth was 2.4 per cent, of which a majority came from the supermarket anchors, while specialty sales growth was 1.6 per cent, which was the same as last year and reflected weaker sales in liquor, leisure – newsagents and games stores and women's apparel.
"We focus on food and non-discretionary items and retailers that are not impacted by online shopping, such as beauty salons and stories such as Priceline."
The group's asset sales were three non-core properties valued at $72.2 million at an average yield of 5.6 per cent. It acquired the Arana Hills Plaza, Queensland, a supermarket-anchored shopping centre for $67.1 million at a fully leased yield of 6 per cent.
Charter Hall Retail has 72 assets, of which 67 per cent are located in metropolitan and commuter metropolitan zones and 33 per cent in regional area. The portfolio will continue to be re-weighted to metropolitan areas.
