Charter Hall Retail REIT has acquired a 49% interest in a portfolio of 20 triple net leased (NNN) Ampol Fuel & Convenience Retail Centres for $50.5 million on an attractive 5.0% cap rate. The remaining 51% interest will be retained by Ampol.
The portfolio of 20 NNN long WALE convenience retail centres provides CQR with a long-term stable and growing income stream underpinned by the portfolio’s 15.6 year WALE and CPI-linked annual rent escalations (2% floor; 5% cap).
The portfolio is heavily weighted to metropolitan locations (75% metro and commuter metro) with all sites enjoying prominent main road locations underpinning existing land values and providing flexibility for alternate uses in the future.
Following the acquisition, Ampol will be CQR’s eighth largest tenant and represent approximately 1% of portfolio income, adding another major tenant to CQR’s tenant mix and further improving the resilience of portfolio income.
Charter Hall Retail CEO, Greg Chubb, commented: “We are delighted to announce today’s acquisition and introduce another major convenience retailer to the CQR portfolio. Today’s acquisition is consistent with our strategy of growing our exposure to market leading convenience retailers and further enhancing the resilience, growth and stability of CQR’s income. The NNN leased nature of these assets and Ampol’s ongoing co-ownership of this portfolio provides CQR investors with an attractive and capital efficient lease structure, while introducing a new partnership with a leading operator in the fuel and convenience sector. The high underlying land value and predominantly metropolitan location of the portfolio also provides significant long-term capital value upside.”
The acquisition will be funded from existing debt facilities and is expected to settle in February 2022. Post-acquisition, proforma look-though gearing is expected to be approximately 34%, comfortably within the 30-40% range.
Earnings and Distribution Guidance Upgrade
CQR’s previous earnings guidance provided on 19 October 2021 was for FY22 earnings per unit (EPU) to be between 27.8 and 28.2 cents per unit (cpu) representing growth of 1.8% – 3.3% on FY21 earnings per unit and distributions per unit (DPU) to be between 23.9 and 24.3 cpu representing growth of 2.1% – 3.8% on FY21 distributions per unit.
In light of today’s acquisition and underlying performance of the portfolio, CQR issues new earnings and distribution guidance.
Barring any further unforeseen events, FY22 earnings per unit (EPU) is expected to be no less than 28.2 cents per unit (cpu) representing growth of no less than 3.3% on FY21 earnings per unit.
FY22 distributions per unit (DPU) are expected to be no less than 24.3 cpu representing growth of no less than 3.8% on FY21 distributions per unit.
It is expected that the 2H FY22 distribution will be greater than the 1H FY22 distribution, reflecting the timing impacts of COVID-19 tenant support.