Charter Hall Long WALE REIT FY21 Results

Charter Hall Long WALE REIT (ASX:CLW) (the REIT) today announces its full year results for the period ending 30 June 2021 (FY21). Key financial and operational highlights for the period are:

Financial highlights:

• Operating earnings of $159.0 million, or 29.2cpu, up 3.2% on the prior corresponding period (pcp)
• Statutory profit of $618.3 million
• Distributions of 29.2cpu, up 3.2% on pcp
• NTA of $5.22, up 16.8% from $4.47 at 30 June 2020
• $523 million net valuation uplift¹, representing 12.1% uplift for FY21
• $652 million of equity raised in FY21
• Balance sheet gearing² of 31.4%, in the middle of the target range of 25% - 35%
• Assigned Moody’s Baa1 investment grade issuer rating

Operating highlights:

• Portfolio weighted average lease expiry (WALE) of 13.2 years, providing long term income security
• $5.6 billion property portfolio, up from $3.6 billion as at 30 June 2020
• $1.4 billion of property acquisitions
• 48% triple net leases (NNN) across the portfolio where the tenants are responsible for all outgoings, maintenance and capital expenditure
• Portfolio cap rate firmed 65 bps from 5.42% at 30 June 2020 to 4.77%.

Avi Anger, Charter Hall Long WALE REIT Fund Manager commented:

“FY21 has seen the CLW portfolio continue to grow in a measured way, enhancing portfolio quality, improving asset and tenant diversification and providing investors with a growing income stream and capital growth. The portfolio is highly diversified across 468 properties valued at $5.6 billion. CLW provides security and continuity of income with a WALE of 13.2 years and 48% of leases that are NNN. These characteristics provide the REIT’s income and distributions significant insulation from market shocks. The 16.8% growth in NTA and 3.2% increase in distributions over the year demonstrates the resilience and attractive nature of our portfolio and the security of income it provides.”

Portfolio update

During FY21, CLW announced $1.4 billion of new property acquisitions which contributed to enhancing portfolio quality, sector diversification and strengthening the quality and diversification of tenants. These transactions comprised:

Acquisitions:

• $638 million of Long WALE Retail acquisitions comprised of a 50% interest in the David Jones, Sydney CBD flagship store with a 20-year NNN lease to David Jones; bp New Zealand Portfolio of 70 convenience retail properties on NNN leases with a 20-year WALE to bp Oil New Zealand; a 33.3% interest in the Myer Bourke Street Mall, Melbourne flagship store with a 10- year net lease to Myer³; a Bunnings property to be developed in Caboolture, Brisbane and an established Bunnings property in Baldivis, Perth³; 50% interest in The Parap Tavern, Darwin and Terrey Hills Tavern, Sydney⁴, both leased to Endeavour Group on initial 15-year NNN leases and a 100% interest in the Ampol travel centre located in Redbank Plains, Brisbane
• $361 million of Social Infrastructure acquisitions comprised of a Telco Exchange property at 76- 78 Pitt Street, Sydney with a 10-year NNN lease to Telstra and a 50% interest in a life sciences property leased to the Australian Red Cross in Sydney, with 9.6-year lease term remaining
•  $311 million of office acquisitions consisting of 50% interests in three modern, long WALE Commonwealth Government properties with first generation leases, comprising an A-grade office building in Tuggeranong, Canberra, leased to Services Australia and two A-grade office towers in Box Hill and Albury, Victoria majority leased to the Australian Tax Office
• $83 million of Industrial & Logistics acquisitions comprised of a 100% interest in a prime industrial property in the core logistics market of Carole Park, Brisbane leased to Simon National Carriers on a 15-year net lease³

Valuations:

Overall, the total property portfolio has increased by approximately $1.93 billion to $5.56 billion for the period, driven by $1.4 billion of net acquisitions and $523 million in property revaluation uplift.

At the end of the period, the REIT’s diversified portfolio is 98.3% occupied and comprised 468 properties with a long WALE of 13.2 years. The portfolio weighted average capitalisation rate firmed 65 bps during the period to 4.77% as at 30 June 2021.

Strengthening the REIT’s capital position

• During FY21, CLW completed several capital management initiatives, including:
• $652 million of equity raised during the period
• Issued $700 million of Australian dollar medium term notes (A$MTN) across 7, 8.5 and 10 year maturities at a weighted average all-in floating cost of 1.2% at issue
• Extended the maturity of the REIT’s syndicated bank facility by three years from March 2023 to March 2026 with reduced margin
• Assigned Moody’s Baa1 investment grade issuer rating

Following these capital management initiatives, CLW has a weighted average debt maturity of 5.6 years and a weighted average hedge maturity of 3.8 years as at 30 June 2021. Pro-forma balance sheet gearing of 31.4% remains in the middle of the target 25–35% range and look-through gearing is 39.7%⁵.

FY22 Guidance

The REIT reconfirms that based on information currently available and barring any unforeseen events or further COVID-19 impacts, CLW provides FY22 Operating EPS guidance of growth of no less than 4.5% over FY21 Operating EPS of 29.2 cents. This equates to a forecast FY22 EPS of 6.4% based on CLW’s closing price as at 1 July 2021 of $4.78.

Announcement authorised by the Board

Click here to view ASX announcement

^{1 Gross valuation uplift less capital expenditure and amortised incentives during the period. Relates to properties which were subject to an independent valuation during the period.}

^{2 Reflects balance sheet gearing, adjusted to include the property acquisitions announced to the ASX on 1 July 2021, the acquisition of the Terrey Hills Tavern that exchanged post-balance date and including distribution reinvestment proceeds from the June 2021 quarter. Unadjusted balance sheet gearing as at 30 June 2021 was 27.4%}

^{3 Property acquisition announced to the ASX on 1 July 2021}

^{4 The acquisition of the Endeavour Group leased Terrey Hills Tavern occurred post reporting date}

^{5 Reflects balance sheet and look through gearing, adjusted to include the property acquisitions announced to the ASX on 1 July 2021, the acquisition of the Terrey Hills Tavern that exchanged post-balance date and including distribution reinvestment proceeds from the June 2021 quarter. Unadjusted balance sheet gearing as at 30 June 2021 was 27.4% and look-through gearing was 36.6%}