By proceeding you confirm that you are a resident of Australia or New Zealand accessing this website from within Australia or New Zealand and you represent, warrant and agree that:
After a gruelling year of hard work, our team behind the launch of Australia’s largest-ever diversified real estate trust were at the finish line.
The new Charter Hall Long WALE REIT was due to list on the ASX on Wednesday, October 19, 2016.
The innovative $1.2 billion fund was designed to appeal to investors hungry for stable and secure income in uncertain times. It would bring together a range of properties diversified across office, industrial and retail, all leased to large, dependable tenant partners such as the federal government, Woolworths, Westpac and Coles.
With a weighted average lease expiry of over 12 years and such blue-chip tenants, the ground-breaking Long WALE REIT offered reliable, predictable cashflows far into the future and was expected to meet strong demand in the market.
A huge amount of effort had gone into bringing the launch to this point, says the fund’s manager, Avi Anger.
“It was a very complex deal,’’ says Avi. “We were stapling together seven different trusts and listing them as one. We had formed a team internally from some of the smartest people in the business across corporate finance, tax, legal.’’
In the weeks ahead of the big day, everything seemed to be going to schedule.
“We went on an initial road show in August, September to test the market, and the response was overwhelming,’’ says Avi. “The investment banks who were working with us on the listing, UBS and JPMorgan, were telling us no problem, we were going to be successful.’’
But even as our team were drawing up their final preparations for the stock exchange float, the global investment climate was rapidly souring. Concerns over a potential Donald Trump victory in the US general election and uncertainty over US Federal Reserve rate rises saw bond rates spike, and the appetite for new public offerings was waning.
On Tuesday, October 18, the Long WALE REIT team went out to the market and launched their bookbuild, the process of generating interest from institutional investors, with trading on the ASX expected to commence the following day. But the phones were strangely quiet, recalls Avi.
“It got to late in the afternoon, and we still hadn’t heard anything,’’ he says. “We thought they (the investment banks) must still be finalising everything - but then 5 o'clock came, still nothing.
“We kept going into the evening, thinking ‘something’s not right here, we should be out having a celebratory drink already’. But we hadn't heard a thing.’’
Then the calls started coming in.
“The head of UBS called David (Charter Hall CEO David Harrison) and explained that interest was a lot weaker than we had expected,’’ says Avi.
“We potentially could have got the deal away, there was a lot of interest from hedge funds that could have got us over the line - but those funds typically will sell at the open, leading to a depressed price when it does list, which isn’t a good look.
“Taking everything into account, we realised we couldn’t proceed.’’
In retrospect the timing of the offering was exquisitely bad luck, says Chris Williams, co-head of equities at UBS.
"If we'd run the book the day before, we probably would have got it away,’’ says Chris. “If we'd run it a week before, we definitely would have got it away. If we'd run it a month before, we would have been stampeded."
But that was little consolation for Avi and his team, who were devastated by their very public failure.
“We were in shock, as you can imagine,’’ says Avi. “There was a lot of debate on whether we should go ahead or not. Some people were suggesting we should just forget about it altogether, or at least postpone it indefinitely. ‘’
Yet after hearing out all opinions, the team behind the Long WALE REIT still believed it could succeed. Instead of abandoning it, they decided they would adapt.
Through belief and hard work, they would reshape the initial offering by revising it downwards to meet reduced demand from nervous markets, and they would make it more attractive by leveraging a portion of available debt, boosting anticipated returns.
“It was hectic,’’ says Avi. “We hit the phones, and spoke to all those people who had been interested. We had to redo all the prospectus documents and prepare new supplementary documents.
“No-one had been expecting a few more weeks of very intense work, but that was what was required - everyone pulling together to make it happen.’’
Within days of their hard work, the team were ready to take the revised offering back to the market, and on 8 November 2016, the relaunched Long WALE REIT successfully debuted on the ASX.
“The responsiveness from the team, turning around in days what usually would take weeks and getting back out to market - that is really what saved the deal"
“It was an amazing turnaround and a very successful listing. And it’s been a very successful performance from the fund ever since.’’
For Avi and everyone else involved, the experience was a powerful lesson in resilience.
“It can be deflating when something doesn't work the first time around, and there are questions as to whether it could ever be successful,’’ says Avi.
“There was a lot of negative press around the time we first filed. But there was also plenty of belief that we could make it happen, and we just focused on that and we did make it happen. It was great to then succeed and show the naysayers that we could.’’
Avi says it’s that can-do spirit which makes him feel that he belongs at Charter Hall.
“I started here over 15 years ago as an Assistant Development Manager,’’ says Avi. “This is a place where there is always lots of opportunity.
“It’s a very dynamic company that’s growing fast, so there is always space for smart, energetic, enthusiastic people looking to move though the organisation.
“How you succeed here depends only on what you’re prepared to put in, the effort you're prepared to make.’’