Charter Hall Long WALE REIT acquires three new hotels and announces portfolio revaluations

Charter Hall Long WALE REIT (ASX:CLW) today announced that the Long WALE Investment Partnership (LWIP), in which the REIT owns a 45% interest alongside Hostplus and Charter Hall Group, has acquired three hotel assets in a sale and leaseback transaction with the ALH Group. LWIP is acquiring the three properties for $23.2 million (100% interest) reflecting a portfolio yield of 6.26%.

The three properties are:

• Brunswick Hotel, 569 Brunswick Street, New Farm, QLD
• Old Sydney Hotel, Cnr of Ellena and Richmond Street, Maryborough, QLD
• The Ship Inn Hotel, 8 Albert Street, Busselton, WA

At settlement, the ALH Group will enter into new 15 year, triple net leases over the properties on the same lease terms as the balance of the LWIP portfolio leases.

CLW Fund Manager, Avi Anger commented:

“We are very pleased to be able to continue to grow our relationship with the ALH Group via the acquisition of these three high quality properties. All three hotels are strongly performing, are on new 15-year, triple-net leases and include either BWS or Dan Murphys outlets at each of the properties. This transaction extends CLW’s WALE and highlights our ability to continue to secure high quality properties, leased to quality tenants with strong covenants.”

The transaction is expected to be slightly accretive to FY18 earnings. CLW’s share of the acquisition will be funded from its existing debt facilities.

CLW is also pleased to announce that 33 of the REIT’s properties were independently valued in June 2017 (~78% of the portfolio). The revaluations result in a $28.4 million uplift, reflecting a 2.8% increase on prior valuations. Post these valuations and the acquisition of the three ALH properties in LWIP, the total portfolio of the REIT will be valued at $1.37 billion with a weighted average capitalisation rate of 6.20%. This reflects a tightening of 11bps from December 2016.

Following these valuations and the write-off of remaining IPO and acquisition costs, it is anticipated that CLW’s NTA will increase by approximately 7.0 cents per unit. Post the acquisition and revaluations, the REIT’s balance sheet gearing is expected to be approximately 30% and look-through gearing is expected to be approximately 39%.

FY18 earnings guidance will be provided at the time of CLW’s FY17 results on 18 August 2017.