Pub assets, logistics boost Charter Hall Long WALE earnings
Exposure to the booming pub and logistic sectors, together with inflation-linked leases for half the portfolio, has underpinned a 47.5 per cent jump in earnings for the Charter Hall Long WALE REIT.
A rise in valuations of 10.4 per cent and a swathe of acquisitions contributed to the improved results and prompted fund manager Avi Anger to predict solid rental growth in the coming 21 months.
During the year, the fund also addressed its debt position, which had been under the spotlight from analysts, by completing $1.7 billion of debt capital management initiatives, including a $1 billion of bank refinancing and extending the average term to 1.5 years and $355 million of new facilities established with an average term of 6.1 years.
For the full year 2022 results, the fund posted $911.1 million in statutory profit and with the new assets, its property portfolio has jumped to $7.1 billion. The annual distribution was 30.5¢ per unit, payable on August 12.
Anger forecast the 2023 operating earnings per share guidance at 28¢ and a distribution per security guidance of 28¢, which was in line with market expectations.
During the year, the ASX-listed fund with a market value of $3.1 billion took over the listed ALE Property group with Hostplus and now owns 78 pubs with adjoining bottle shops that are leased to the Endeavour group.
The fund also bought an industrial asset in Sydney’s core industrial precinct of Wetherill Park, leased to Cleanaway and ResourceCoIt and entered into partnership with Metcash, securing a 10-year lease extension at Canning Vale distribution centre in Perth, to add to its 26 logistic assets across the country.
The fund listed in November 2016 to focus on assets with long leases. At the time, its portfolio included 54 pubs and bottle shops. The top four tenants, Woolworths, Commonwealth of Australia, Metcash and Wesfarmers, accounted for 89 per cent of the leases.
“The 2022 year has seen the fund continue to grow in a measured way, enhancing portfolio quality and improving asset and tenant diversification,” Anger said.
“Looking forward, 49 per cent of the fund’s leases are inflation-linked, providing a significant opportunity for strong rental growth in the year ahead.”
Moody’s Investors Service vice president Saranga Ranasinghe said the fund’s results were in line with its expectations.
“The results highlight the strength of the good-quality, diversified portfolio with long weighted-average lease expiries and favourable lease structures,” Ranasinghe said.
She said that while the debt levels remained at the “high end of our tolerance levels” for its rating following the acquisition of ALE Direct Property Trust as part of a consortium, the fund benefitted from its inflation-linked rent reviews.
“Charter Hall Long WALE REIT also has 77 per cent of its debt hedged and minimal debt maturities before the 2027 financial year, which provides it with some protection amid rising interest rates,” Ranasinghe said.
