Charter Hall Long WALE REIT Profits down -16%


Charter Hall Long WALE REIT announced today its FY19 results for the period ending 30 June 2019 with Statutory Profits lower off the back of smaller valuation gains but Operating Earnings up 2%.

Key financial and operational highlights for the period are:

Financial highlights:

  • Operating earnings of $70.8 million, or 26.9cpu, up 2% on the prior corresponding period (pcp)

  • Statutory profit of $69.6 million, down 16% on June 2018

  • Distributions of 26.9cpu, up 2% on pcp

  • NTA of $4.09, up 1% from $4.05 at 30 June 2018

  • Balance sheet gearing of 27.5%, within target range of 25% - 35%

  • $406.3 million of new equity raised Operating highlights:

  • Portfolio WALE of 12.5 years, up 16% from 10.8 years at 30 June 2018

  • Property portfolio valued at $2.13 billion, up 40% from 30 June 2018

  • $707 million of property acquisitions and $173.7m of divestments during the year

  • Portfolio cap rate firmed 18 bps from 6.13% at 30 June 2018 to 5.95%

Avi Anger, Charter Hall Long WALE REIT Fund Manager commented: “FY19 has been another very strong result for CLW as we continue to deliver on our strategy of actively managing the portfolio to ensure we have properties with long leases to high quality tenants. Our WALE enhancing acquisitions, active approach to leasing and partnership approach with our tenant customers has enabled us to increase the portfolio WALE from 10.8 years to 12.5 years. We have successfully enhanced sector and tenant diversification with the introduction of the Inghams portfolio in the agri-logistics sector and a number of new government, ASX-listed and multinational tenants.”

“We are pleased to announce that the REIT has delivered Operating EPS of 26.9 cents, reflecting 2% growth over FY18 Operating EPS. During the period we upgraded original FY19 Operating EPS guidance, and then delivered at the top end of this upgraded guidance range.”

Portfolio update

During FY19, CLW successfully completed $707.0 million of new property acquisitions and $173.7 million of divestments which contributed to extending the portfolio WALE, enhancing sector diversification and strengthening the quality and diversification of tenants.

These transactions comprised:

  • Acquisitions:

  • $314.0 million of high-quality office property anchored by government, Telstra and Thales and weighted towards key eastern seaboard markets

  • $109.4 million of industrial property

  • $76.6 million of long WALE retail property – $207.0 million national portfolio of agri-logistics properties with triple net leases to ASX-listed Inghams Group

  • Divestments:

  • 50% interest in ATO Adelaide office property for $135 million – Grace Worldwide industrial property in Brisbane for $38.7 million

  • Lease extensions

  • In February 2019, CLW announced lease extensions across the Inghams portfolio, increasing the Ingham’s portfolio WALE from 15.8 years to 24.6 years

  • CLW has also secured two major lease extensions with SUEZ at Newton and Davis Road in Wetherill Park, with new 20 year leases executed at both properties representing WALE extensions of 17.4 years and 12.4 years respectively

  • CLW is pleased to announce that it has entered into an agreement with Woolworths in relation to an extension of the lease term at 364-426 Old Geelong Road, Hoppers Crossing, Victoria. CLW has agreed terms with Woolworths Group (ASX:WOW) effective from 1 September 2019 to extend the current lease term from its existing expiry date of 31 December 2020 to 31 December 2025. A market incentive will be paid in relation to the extended lease term. The lease otherwise remains on substantially the same terms with the net passing rent being maintained with 3.0% per annum fixed increases. CLW has also agreed for Woolworths Group to assign the lease to Linfox Australia Pty Ltd (Linfox) effective from 2 September 2019. This assignment is consistent with a new services arrangement between Woolworths and Linfox, to enable Linfox to provide warehouse logistics services to BIG W stores.

Avi Anger, CLW Fund Manager commented “It is pleasing to be able to announce this lease extension. As the next major lease expiry of significance in the portfolio, extending this lease out to December 2025 improves the WALE of CLW and, as a result, the earnings certainty for our investors. This lease extension also demonstrates Charter Hall’s strong relationships with our tenant customers and our ability to work with tenants to achieve mutually beneficial outcomes.”

Overall, the total property portfolio has increased by approximately $608 million to $2.13 billion for the period, driven by $533 million of net acquisitions and $64 million in gross property revaluations. At the end of the period, the REIT’s diversified portfolio is 99.6% occupied and comprises 118 properties with a long WALE of 12.5 years. The portfolio weighted average capitalisation rate firmed 18 bps during the period to 5.95% as at 30 June 2019.

Strengthening the REIT’s capital position

During FY19, CLW completed several capital management initiatives, including:

  • $406.3 million of equity raised during the period comprising:

  • a fully underwritten $60 million institutional placement and a $11 million security purchase plan to fund the 100% acquisition of the National Archives, Sydney and 50% of Optima Centre, Perth in October 2018

  • a fully underwritten $125 million accelerated non-renounceable entitlement offer to partially fund the acquisition of the Inghams portfolio in December 2018

  • a fully underwritten $190 million institutional placement and a $11 million security purchase plan to fund the acquisition of Telstra Canberra Head Office, Thales Australia Head Office, Sydney Olympic Park and 50% of the Brisbane City Council Bus Network Terminal in June 2019

  • proceeds from CLW's distribution reinvestment plan

  • Increased debt capacity by $245.6 million during the period comprising:

  • two new $100 million, five year debt facilities from two international banks

  • new facility related to the Brisbane City Council Bus Network Terminal of $25.6 million (CLW 50% interest)

  • refinanced the LWIP bank facility portion of the debt of that vehicle extending the term to 5 years and increasing the limit by $10m (CLW 50% interest)

  • increased the limit of the REIT’s syndicated debt facility by $10 million.

Following these capital management initiatives, the REIT has a long- dated hedge maturity of 4.3 years and a weighted average debt maturity of 4.5 years at 30 June 2019. Balance sheet gearing of 27.5% as at 30 June 2019 remains well within the target 25–35% range.

FY19 Operating Earnings Guidance

The REIT confirms that barring any unforeseen events and no material change in current market conditions, CLW’s guidance for FY20 is Operating EPS of 28.0 cents per security reflecting Operating EPS growth over FY19 of 4.0%. The target distribution payout ratio remains at 100% of Operating Earnings.

CLW Trading Chart vs ASX200 AREIT Blue - CLW, Purple ASX200 AREIT Last 12 months

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SYDNEY   NSW   1225

Tel: +61 412 173 476

Email: warwick@cmaust.com

ABN: 32 610 910 819

AFSL: 493605

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