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Charter Hall Retail REIT (ASX:CQR) (the REIT) today announced an operational update for the quarter ending 31 March 2017.
Key Operational Highlights
The REIT has continued to deliver on its strategy with a focus on active asset management, enhancing portfolio quality and prudent capital management.
Occupancy remained stable at 98.0% with specialty sales growth at 0.5% for the quarter
Anchor tenant MAT continues to improve with growth of 2.8% for stores in turnover
Development application approved for the Lake Macquarie/Mt Hutton re-development with construction proposed to commence Q1 2018
Completion of a $1.8 million unit buy back at $4.34
Consistent Portfolio Performance through Active Asset Management
The REIT’s anchor tenants reported solid growth of 2.8% for stores paying turnover rent with 35% of all stores now paying additional turnover rent. This is a significant improvement compared to the prior corresponding quarter in FY16 of 1.2% growth and 16% of stores paying turnover rent.
The occupancy of the REIT’s portfolio remained stable at 98.0%. Combined specialty rent growth on new leases and renewals was 1.1% for the nine months to 31 March 2017, a slight improvement on the prior corresponding period of 1.0%.
Specialty shop sales growth continued to slow post half year with MAT growth for the quarter at 0.5%. This is reflective of current trading conditions. Other key specialty metrics such as occupancy cost and average sales remain in line or have marginally improved post half year results.
Enhancing Portfolio Quality
The REIT confirmed at its 2017 half year results, that it will continue to reduce exposure to freestanding and smaller neighbourhood assets to optimise returns via acquisition of larger, projected higher growth assets, development, buy back of units or a return of capital.
The REIT executed on this strategy during the first half of 2017 by divesting $71.2 million of assets at a 10.4% premium to the June 2016 book values at a combined yield of 5.8% . These proceeds were reinvested into the acquisition of Arana Hills for $67.1 million in December 2016.
During the quarter ending 31 March 2017, Woolworths Rosehill was contracted for sale at $13.0 million reflecting a 4.0% premium to the 31 December 2016 book value. In addition the REIT is marketing approximately $170 million of assets and continues to assess acquisition opportunities.
The REIT has also continued its capital management strategy to optimise shareholder returns, buying back $1.8 million of units at $4.34 during the quarter. In addition the REIT completed the refinance of
$235 million of debt maturing in FY18 in its CHRP1 joint venture, extending the debt maturity to FY22 and reducing the facilty to $220 million.
Barring unforeseen events and subject to the timing of acquisitions and divestments, the REIT confirms that FY17 guidance for operating earnings is expected to be 30.4 cents per unit. The distribution payout ratio range is expected to remain between 90% and 95% of operating earnings.
Fund Manager Scott Dundas commented :
“We continue to transition the portfolio from smaller non- core assets into larger centres where we can add value through active management. Our recent transactions and prudent capital management initiatives demonstrate our ability to execute on this strategy to deliver unitholders a secure and growing income stream.”