Charter Hall Social Infra REIT Lifts Earnings by 8% and forecasts steady FY23

The Charter Hall Social Infrastructure REIT released its FY23 results revealing an 8% growth in earnings and a 25% increase in NTA.

As at June 2022, the Fund held 364 Childcare assets worth $1.6bn (80% of portfolio) together with 4 other social infrastructure assets worth $320m. Over the past 12 months, the Fund invested a $232m across a diverse range of social infrastructure assets including;

• 23 childcare centres
• 2 healthcare assets, and
• a 50% interest in the Robina TAFE Campus

The Group also completed the development of 6 childcare assets as well as the SA Emergency Command Centre.

Charter Hall Social Infrastructure REIT’s Fund Manager, Travis Butcher said: “CQE has continued to actively manage the portfolio and increase its weighting towards larger-scale social infrastructure assets. This has delivered an improvement in portfolio and tenant quality and diversification providing improved security of income and long-term capital growth for Unitholders”.

The Fund secured like for like rental increases across the portfolio of 3.4% which contributed to a valuation increase of $269.43 million or 19.4%, with an average capitalisation rate of 4.7%.

The sharp rise in values reflects a 52% increase in total childcare transaction volumes across the market which saw the sector reach a record $832 million of sales, with an average yield of 4.7%, reflecting ongoing strong demand for long WALE assets in ‘essential’ sectors with stable income.

CQE will continue to execute on its strategy and pursue high quality social infrastructure opportunities and actively manage the portfolio to maintain income security and capital growth and barring any unforeseen events, CQE expects to provide distributions of 17.2 cents per unit for FY23.

Charter Hall Social Infrastructure REIT (ASX: CQE) today announced its results for the full year ended 30 June 2022. Key financial and operating highlights for the year are:

Financial Highlights

• Statutory profit of $358.5 million, up $184.4 million on the prior corresponding period (“pcp”)
• Operating earnings of $62.9 million, up 8.4% on pcp
• Operating earnings of 17.3 cents per unit (“cpu”), up 8.1% on pcp
• Distribution of 17.2 cpu, up 9.6% on pcp
• Gross assets of $2.1 billion, up 35.0% since June 2021
• NTA of $4.08 per unit up 25.5% since June 2021
• Balance sheet gearing of 29.8% with investment capacity of $160 million

Operating Highlights

• Property portfolio valuation increase of $269.43 million or 19.4%
• $232.7 million of social infrastructure assets acquisitions including 23 childcare assets, 2 strategically located healthcare assets and a 50% interest in a recently completed TAFE Queensland education campus
• Completion of 6 childcare development assets with a total value of $42.3 million
• In partnership with CQE’s largest tenant customer, Goodstart, Charter Hall has committed funding towards the Early Learning Fund, assisting at least 55 vulnerable families to provide their children with the benefits of early learning over two years
• Launched two-year partnership with the Green Building Council of Australia to create Australia’s first social infrastructure rating tool for operational assets

Property Valuations

During the year 100% of CQE’s portfolio was externally revalued at least once. On a like-for-like basis, the portfolio valuation increase for the year was $269.4 million or 19.4%. This resulted in the passing yield across the property portfolio firming to 4.7%, reflecting ongoing strong demand for long WALE assets in ‘essential’ sectors with stable income.

A 52% increase in total childcare transaction volumes on FY21 saw the sector reach a record $832 million of sales, with an average yield of 4.7%.

Capital Management

In February 2022, CQE further extended and increased its debt facilities by $100 million, to a total of $800 million. CQE has diversified funding sources with a weighted average debt maturity of 3.9 years and no debt maturity until January 2025.

As at 30 June 2022, after the inclusion of contractual commitments, CQE’s balance sheet gearing is 29.8% and look-through gearing is 30.7%. Available investment capacity is $160 million, comprising undrawn debt facilities.

Outlook

CQE will continue to execute on its strategy and pursue high quality social infrastructure opportunities and actively manage the portfolio to maintain income security and capital growth.

Based on information currently available and barring any unforeseen events, CQE provides FY23 distribution guidance of 17.2 cents per unit.

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