Charter Hall Long WALE REIT on growth path with strong earnings
The Charter Hall Long WALE REIT has unveiled a healthy first-half result, with operating earnings hitting $73.6m.
The Charter Hall Long WALE REIT has unveiled a healthy first-half result, with operating earnings hitting $73.6m after a series of property purchases in a sign that well-positioned trusts have come through the coronavirus crisis.
The trust, which specialises in buying properties with long leases, has pushed into areas including petrol stations but is also snapping up city buildings occupied by blue chip tenants.
The fund is part of the expanding Charter Hall empire and also expanded its telco exchange portfolio with the acquisition of Telstra’s Pitt Street, Sydney CBD telco exchange. At the end of the half it also bought a 50 per cent interest in the David Jones flagship Elizabeth Street store in the Sydney CBD.
Fund manager Avi Anger said the trust had also diversified and improved the resilience of the portfolio by extending its partnership with BP, acquiring an interest in 70 Long WALE triple-net convenience retail properties in NZ.
The trust lifted operating earnings per share by 3.6 per cent to 14.5c and the distributions followed suit as it turned in a half-year profit, including moves in the value of its portfolio, of $198.6m.
The trust raised $388m of new equity as it took the size of its property portfolio to $4.5bn via $697m of acquisitions and a $150m net property valuation lift.
Mr Anger said the trust was buying long-leased properties with high underlying land value that should provide long-term growth prospects for investors. The two latest Sydney building purchases could become developments in future given their strategic positions.
The portfolio had weighted average lease expiry of 14.1 years and hit a value of $4.5bn, up from $3.6bn at the beginning of the half.
The trust reiterated fiscal 2021 operating earnings per security and distribution per security of no less than 29.1c per security, and analysts tipped it could capitalise on low interest rates to make more acquisitions.
“Given the group’s acquisitive nature, we see potential for additional upside to this given balance sheet capacity,” Macquarie analysts said, noting the balance sheet gearing of 29 per cent was in the middle of the target range.
The fund did not provide an update on its property at Bowen Hills, Queensland, where airline Virgin moved out, leaving it empty and prompting a 45 per cent devaluation.
“Solid result as expected given the nature of cashflows. Tenant base continues to show resilience to COVID-19 impacts with limited rent relief provided again,” Macquarie analysts said.
UBS said that the trust had the longest leases in the sector, which should see it remain supported in a low-interest-rate environment.
Jarden analysts also backed the stock. “With a 6.3 per cent dividend yield and circa 3 per cent growth, we believe Charter Hall Long WALE REIT offers an attractive risk-return,” Jarden said.
The trust’s units closed steady at $4.70 after a strong run-up over the past month.
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