Charter Hall Long WALE REIT – Acquisitions and Equity Raisingright-arrow
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by Charter Hall Announcements

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NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES

Charter Hall WALE Limited as responsible entity of the Charter Hall Long WALE REIT (ASX:CLW) (CLW or the REIT) is pleased to announce that it:

  • has entered into agreements to acquire 50%1 interests in three modern, long WALE suburban office properties and one modern life sciences property and has settled the acquisition of a long WALE convenience retail property (together, the Acquisitions) with a total purchase price of $415.4 million; and
  • will undertake a fully underwritten accelerated non-renounceable entitlement offer to raise approximately $250 million (Entitlement Offer) to partially fund the Acquisitions and associated transaction costs.

Overview of the Acquisitions

The REIT has entered into agreements to acquire 50% interests in three modern, predominantly Commonwealth Government leased suburban office properties and one modern life sciences property:

  • the Services Australia Building in Tuggeranong, ACT for $153.0 million;
  • the Australian Taxation Office (ATO) Building in Box Hill, VIC for $115.0 million;
  • the Red Cross Building in Alexandria, NSW for $79.5 million; and
  • the ATO Building in Albury, NSW for $42.5 million.

In addition, the REIT has settled the acquisition of a 100% interest in an Ampol-anchored long WALE convenience retail property in Redbank Plains, QLD for $25.4 million.

The total property purchase price for the Acquisitions is $415.4 million, reflecting a passing yield of 5.2%. The Acquisitions feature a long weighted average lease expiry (WALE) of 9.2 years with an attractive weighted average rent review (WARR) of 3.6% p.a.

Avi Anger, Fund Manager of CLW said:

“The Acquisitions of these modern, long WALE properties reinforces the REIT’s strategy of acquiring high quality properties with long leases to strong tenant covenants. The properties are diversified across the Eastern Seaboard and support the provision of essential government, life sciences and convenience retail services.
The Acquisitions are 75% leased by income to the Commonwealth Government and will increase CLW’s exposure to Government tenants from 16% to 21%. The Acquisitions weighted average rent review of 3.6% is accretive to CLW’s portfolio weighted average rent review and supports the REIT’s secure and growing income profile.”

Portfolio impact

 Pre-Acquisitions2AcquisitionsPost-Acquisitions
Number of properties4595464
Property valuation$4,482m$415m$4,897m
Occupancy97.5%100.0%97.7%
WALE14.2 years9.2 years13.8 years
WARR32.2%3.6%2.3%
Proportion of leases subject to fixed rent review57%100%61%

Entitlement Offer

To partially fund the Acquisitions and associated transaction costs, CLW will undertake a fully underwritten 1-for-10.68 accelerated non-renounceable entitlement offer to raise approximately $250 million.

Charter Hall Group, CLW’s largest securityholder with approximately 11.5% of securities on issue, has committed to take up its full entitlement under the Entitlement Offer, representing a commitment of approximately $29 million.

The Entitlement Offer will be issued at a fixed price of $4.65 per security, which represents a:

  • 3.3% discount to the last close of $4.81 per security on 17 May 2021;
  • 3.1% discount to the theoretical ex-rights price of $4.80; and
  • 6.5% FY22 forecast Operating EPS yield4.

Securities issued under the Entitlement Offer will rank equally with existing CLW securities from the date of issue and will be entitled to the distribution for the three months to 30 June 2021.

The Entitlement Offer is fully underwritten.

The retail entitlement offer will only be available to eligible CLW securityholders in Australia or New Zealand.

The balance of the funding for the Acquisitions and associated transaction costs will be sourced from existing CLW debt facilities.

Earnings guidance

Including the anticipated impact of the Acquisitions and Entitlement Offer and based solely on information currently available and barring any unforeseen events, CLW is pleased to:

  • upgrade its FY21 Operating EPS guidance to 29.2 cents per security, reflecting growth of 3.2% over FY20 Operating EPS of 28.3 cents per security; and
  • provide FY22 Operating EPS guidance of no less than 2.75% growth over upgraded FY21 Operating EPS of 29.2 cents per security.

Including the impact of the Acquisitions and Entitlement Offer, the REIT's pro-forma Dec-205:

  • balance sheet gearing is 30.4%, within CLW's target range of 25 – 35%;
  • look through gearing is 39.7%; and
  • NTA per security is $4.65.

Timetable

EventDate
Trading halt and announcement of the Acquisitions and Entitlement OfferTuesday, 18 May
Institutional Entitlement Offer conductedTuesday, 18 May
Announcement of results of Institutional Entitlement OfferWednesday, 19 May
Trading halt lifted and securities recommence tradingWednesday, 19 May
Entitlement Offer Record Date7:00 PM, Thursday, 20 May
Retail Entitlement Offer opens and retail offer booklet dispatched9:00 AM, Monday, 24 May
Early retail acceptance due date5:00 PM, Wednesday, 26 May
Settlement of new securities issued under the Institutional Entitlement Offer and Early Retail Entitlement OfferThursday, 27 May
Allotment and normal trading of new securities issued under the Institutional Entitlement Offer and Early Retail Entitlement OfferFriday, 28 May
Retail Entitlement Offer closes5:00 PM, Wednesday, 2 June
Announcement of results of Retail Entitlement OfferFriday, 4 June
Settlement of new securities issued under the Retail Entitlement OfferTuesday, 8 June
Allotment of new securities under the Retail Entitlement OfferWednesday, 9 June
Normal trading of new securities issued under the Retail Entitlement OfferThursday, 10 June
Holding statements in respect of new securities issued under the Retail Entitlement Offer dispatchedThursday, 10 June

All dates and times are indicative only and subject to change. Unless otherwise specified, all times and dates refer to AEST.

Additional information

Additional information about the Acquisitions and Entitlement Offer including certain key risks are contained in the investor presentation released to the ASX today. All amounts are in Australian dollars unless otherwise indicated.

 

1 Remaining 50% interest in each property will be owned by a Charter Hall managed fund

2 As at 31 December 2020, pro forma adjusted for the acquisition of David Jones, Sydney which was announced on 22 December 2020 and the acquisition of Bunnings Caboolture (at the on-completion valuation) which was announced on 9 December 2020

3 CPI is assumed at 1% on average over the forecast period

4 Based on CLW’s guidance for FY21 Operating EPS of 29.2 cents per security, and FY22 Operating EPS growth of no less than 2.75% based solely on information currently available and barring any unforeseen events

5 As at 31 December 2020, with pro forma adjustments outlined in Appendix A of the investor presentation released to the ASX on 18 May 2021

Announcement Authorised by the Board

Click here to view the ASX Announcement

Click here to view the Investor Presentation

Click here to view the Cleansing Statement

Click here to view the Appendix 3B