Charter Hall Long WALE Investment Partnership 2 has agreed to acquire two additional Endeavour leased assets and to sell an 18% interest in the Fund to the Charter Hall Retail REIT (CQR).
The Charter Hall Long WALE Investment Partnership 2 is an existing Charter Hall partnership with HostPlus that now consists of eleven Endeavour Group leased retail assets, with six located in Queensland (32% of portfolio value), three in Victoria (48% of portfolio value) and two in South Australia (20% of portfolio value). The portfolio benefits from initial 15 year triple-net (NNN) leases, the majority of which having uncapped CPI annual rent escalations, whilst ten of the properties include Endeavour-branded off-premise bottle shops (three Dan Murphy’s and seven BWS). This continued increased weighting to CPI linked rental growth provides CQR with further exposure to the convenience long WALE retail sector, while also expanding CQR’s existing relationship with the $12 billion market cap publicly listed Endeavour Group as a major tenant customer.
CQR has acquired its initial equity interest in the partnership for $42 million with a forecast year one passing yield of greater than 4.7%. The transaction has been funded by reinvesting the sale proceeds from the disposal of Allenstown Square, QLD, which was sold at book value.
Following the acquisition, Endeavour Group will be one of CQR’s top ten tenants, representing 1.4% of portfolio income. In addition, the LWIP2 investment further increases CQR’s exposure to NNN CPI- linked leases, taking overall portfolio income directly linked to CPI from 23% to 24% and total portfolio income directly or indirectly linked to CPI to 60%. CQR has the ability to equalise ownership in the partnership over time via further investment to diversify the portfolio through acquisitions, as agreed with Hostplus.
Ben Ellis, Charter Hall Retail CEO said: “I’m delighted to announce our investment in this partnership today. This transaction significantly increases CQR’s existing exposure to Endeavour Group and convenience long WALE retail, further diversifying and improving the resilience of our income profile. This continues our up weighting to resilient rental growth from direct CPI annual escalations, through NNN leases to Australia’s largest operator in this retail sector.
“Our on-going portfolio curation continues to improve the organic growth in CQR while strengthening the resilience of our income through growing our exposure to major tenant retailers. We look forward to growing this partnership with Hostplus and continuing to deliver a resilient and growing income stream for CQR unitholders.”
Today’s transaction is not expected to materially change CQR’s FY23 earnings and as such, barring any unforeseen events CQR’s FY23 guidance is reaffirmed. FY23 earnings per unit is expected to be no less than 28.7 cents per unit representing growth of no less than 1% over FY22 earnings per unit.
FY23 distributions per unit are expected to be no less than 25.8 cents per unit representing growth of 5.3% over FY22 distributions per unit.
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