Charter Hall snares 225 Convenience Retail Assets

11 December 2019

Three Charter Hall funds have acquired a 49% interest in $1.7bn of convenience retail properties operated by fuel giant BP.


The BP portfolio, marketed by JP Morgan, comprises 225 properties, across metro locations on the Australian eastern seaboard. The portfolio has a weighted average lease expiry of 20 years and a triple-net structure with annual CPI increases.


Charter Hall will spread the 49% investment across the Charter Hall Long WALE REIT (50 per cent), Charter Hall Retail REIT (30 per cent) and Charter Hall Group (20 per cent).


To partially fund its $619m investment, Charter Hall Long WALE REIT will undertake a fully underwritten $350 million equity raising, with JPMorgan and UBS. The Equity Raising will be issued at a fixed price of $5.35 per security, which represents a:

  • 4.6% discount to the distribution-adjusted last close of $5.61 per security on 11 December 2019
  • 4.4% discount to the theoretical ex-rights price of $5.59 per security, and a
  • 5.3% FY20 forecast Operating EPS yield


Avi Anger, Fund Manager of Charter Hall Long WALE REIT (CLW), said the acquisitions would enhance the fund's key metrics with a combined 23.4-year weighted average lease expiry across the two portfolios.


"The addition of these triple net leased properties increases the proportion of triple net leased properties in the portfolio to 46 per cent," Mr Anger said.


The CLW also announced an update on the results of the re-valuation of 92 of the REIT's 158 existing properties (c.71% of portfolio by value), resulting in a $83.5m net valuation uplift, or a 2.9% increase over prior valuations and reflecting 19 bps of capitalisation rate compression for those properties. Post the revaluations, the portfolio's overall weighted average capitalisation rate firmed 14 bps to 5.6%, prior to the Acquisitions.


Charter Hall Retail REIT's equity commitment for its 30% interest is approximately $137 million, which will be funded through contracted and planned asset divestments.

In addition to previously disclosed asset sales, a further five assets have been contracted to divest to the value of $117m consisting of four freestanding regionally located assets at Moe, Kyneton, and Bairnsdale in Victoria, Cooma in NSW and Erindale Shopping Centre, ACT. These assets have been contracted at a combined 3.5% premium to 30 June 2019 book values. CQR intends divesting a further $100 million approximately of non core assets in an orderly divestment program to maintain portfolio gearing in the middle of the target 30-40% range.