Charter Hall has used its platform of Funds to acquire 4 assets worth $780m, 3 of which are being sold by South Korea’s AIP Asset Management.
The portfolio comprises four assets with a total NLA of 69,503sqm;;
- the Services Australia Building in Tuggeranong, ACT for $306.0 million;
- the Australian Taxation Office (ATO) Building in Box Hill, VIC for $230.0 million;
- the Red Cross Building in Alexandria, NSW for $159 million; and
- the ATO Building in Albury, NSW for $85 million
The portfolio is characterised by long leases to Commonwealth government or government supported tenant customers with an average WALE of 9.1 years, which benefit from fixed rental increases of between 3.5% and 4.0% per annum (3.6% weighted average rental increase).
The portfolio will be acquired in joint venture between CLW, who will own 50% of each asset, and the Charter Hall Direct Office Fund (Tuggeranong and Box Hill), the Charter Hall Direct PFA Fund (Albury) and the Charter Hall Direct Industrial Fund No.4 (Alexandria).
This acquisition grows the Charter Hall platforms office portfolio to beyond $23 billion which is secured by a 30% exposure to government/government related tenants.
Charter Hall’s Managing Director and Group CEO, David Harrison, said “We continue to deliver on the long WALE and government lease thematic that Charter Hall has pursued for many years which, in the current environment of low interest rates and the focus on secure and growing income streams, provides attractive risk adjusted returns to both our listed and unlisted fund investors.”
“We are also very pleased to secure another asset in the Social Infrastructure sector leased to such an essential service provider as the Australian Red Cross” said Mr Harrison.
Mr Harrison commented that it brings Charter Hall’s total acquisitions in FY21 across the office, retail, industrial & logistics and social infrastructure sectors to approximately $7.0 billion.
Charter Hall’s Direct CEO, Steven Bennett, said “the 50% share of the Portfolio acquisition by Charter Hall’s Direct funds lifts the Direct business to approximately $7.5 billion in scale pre any 30 June revaluations that will come through.
“The opportunity for three of the open for investment Direct funds being able to acquire these assets showcases the diversity of the opportunities the Charter Hall Group provides to its Direct investors and the institutional quality of the assets held by these funds which boast an average WALE of between 7.6 and 11.8 years. All these funds have in excess of 96% occupancy and are leased to high quality tenant customers” said Mr Bennett.
Colliers led by James Barber sourced the transaction off-market on behalf of Charter Hall.
Avi Anger, Fund Manager of the Charter Hall Long WALE said, “The Acquisitions of these modern, long WALE properties reinforces the REIT’s strategy of acquiring high quality properties with long leases to strong tenant covenants. The properties are diversified across the Eastern Seaboard and support the provision of essential government, life sciences and convenience retail services.
The properties offer a long weighted average lease expiry of 9.2 years and were transacted on a passing yield of 5.2%.
To partially fund the Long WALE REIT acquisitions, CLW will undertake a fully underwritten 1-for-10.68 accelerated non-renounceable entitlement offer to raise approximately $250million.
Charter Hall Group, CLW’s largest securityholder with approximately 11.5% of securities on issue, has committed to take up its full entitlement under the Entitlement Offer, representing a commitment of approximately $29 million.
The Entitlement Offer will be issued at a fixed price of $4.65 per security, which represents a:
• 3.3% discount to the last close of $4.81 per security on 17 May 2021;
• 3.1% discount to the theoretical ex-rights price of $4.80; and
• 6.5% FY22 forecast Operating EPS yield
Including the anticipated impact of the acquisitions and entitlement offer CLW has upgraded its FY21 Operating EPS guidance to 29.2 cents per security, reflecting growth of 3.2% over FY20 Operating EPS of 28.3 cents per security; and provide FY22 Operating EPS guidance of no less than 2.75% growth over upgraded FY21 Operating EPS of 29.2 cents per security.
Including the impact of the acquisitions and entitlement offer, the CLW REIT’s pro-forma Dec-20:
• balance sheet gearing is 30.4%, within CLW’s target range of 25 – 35%;
• look through gearing is 39.7%; and
• NTA per security is $4.65.
Further Information
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