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Charter Hall Long WALE REIT (ASX:CLW) is pleased to announce that CLW and a Charter Hall managed trust on behalf of Host-Plus Pty Limited1 (Hostplus), (together the Consortium) have entered into a Scheme Implementation Deed (SID) with ALE Property Group (LEP) to acquire all of the LEP Stapled Securities2 via schemes of arrangement, subject to certain conditions (the Transaction).
In addition, CLW has also acquired two industrial properties in Sydney and Brisbane with WALEs of 16.8 years and 7.9 years respectively, for a total purchase price of approximately $67 million (together, the Acquisitions). Further detail on the Acquisitions is included in Appendix 2 of this announcement.
Including the impact of the Transaction and Acquisitions, and based on information currently available and barring any unforeseen events, CLW reconfirms its forecast FY22 operating earnings per security (OEPS) guidance of no less than 4.5% growth over FY21 OEPS.
CLW has today announced that it has entered into a SID with LEP under which the Consortium will acquire all of the LEP Stapled Securities via schemes of arrangement, subject to certain conditions. CLW is undertaking the Transaction alongside Hostplus, its existing capital partner in the Long WALE Investment Partnership (LWIP) and each Consortium member will own 50% of LEP’s assets post Transaction.
Under the Transaction terms, LEP Securityholders will receive $5.683 per LEP security (Consideration) comprising:
LEP securityholders will also receive the LEP September 2021 quarter distribution of $0.055 per LEP security. The total cash consideration paid will be reduced by any further LEP distributions made prior to the implementation date (other than the September 2021 quarter distribution of $0.055 per LEP security). If the Transaction proceeds and completes prior to the CLW distribution record date on 31 December 2021, LEP Securityholders are expected to be entitled to receive the CLW distribution for the three months ending 31 December 2021. Total enterprise value consideration (including transaction costs) will be approximately $1.68 billion (100% basis).
The current implied value of the Consideration under the Transaction of $5.884 represents a:
The LEP Board has unanimously recommended LEP Securityholders vote in favour of the Transaction, in the absence of a superior proposal and subject to an Independent Expert concluding that the Transaction is in the best interests of LEP Securityholders.
Transaction benefits and rationale
The Transaction is designed to provide LEP Securityholders with an attractive premium for their securities and on-going participation in the benefits associated with an investment in CLW.
The Transaction also represents an opportunity for CLW Securityholders to acquire a large scale, materially under-rented portfolio of high quality hospitality assets.
1. Highly strategic and well-located properties
2. High quality tenant counterparty
3. Attractive lease structure
4. Strong rental growth
Avi Anger, Fund Manager of CLW commented: “We believe the Transaction is attractive and designed to deliver significant benefits to both LEP and CLW Securityholders. The Transaction is consistent with CLW’s strategy to invest in high quality real estate assets that are predominantly leased to corporate and government tenants on long term leases. We are pleased to be able to continue our partnership with Hostplus, a leading Australian Superannuation Fund, in investing in high quality pubs and liquor retail outlets leased to Endeavour Group.”
Impact on CLW’s portfolio
Post Transaction, CLW will continue to be Australia’s largest and most diversified long WALE REIT with an estimated pro forma market capitalisation of approximately $3.8 billion7. Key metrics of CLW’s portfolio include:
|Number of properties||472||550|
|Property value||$5.7 billion||$6.5 billion9|
|WALE||13.2 years||12.6 years|
|Proportion of NNN Leases||47%||51%|
|Portfolio review type weighting: CPI-linked review / Fixed review||39% / 61%||45% / 55%|
Key details of the Transaction
The Transaction is to be implemented via LEP schemes of arrangement, which will require LEP Securityholder approval. CLW stapled securities issued to LEP Securityholders as part of the Transaction will rank equally with existing CLW stapled securities.
The Transaction is conditional upon a number of matters set out in the SID, including LEP Securityholder approval of the schemes of arrangement (75% of votes cast and 50% of Securityholders voting), and other customary conditions.11
A full copy of the SID is attached to this announcement.
The Consortium has engaged Morgan Stanley Australia Limited and Ord Minnett Limited as its financial advisors and Arnold Bloch Leibler as its legal advisor in relation to the Transaction.
Indicative implementation timetable
|Submit draft scheme booklet to ASIC||Mid October|
|First court hearing||Early November|
|Scheme booklet dispatching to LEP securityholders||Early November|
|LEP scheme meeting to approve schemes of arrangement||Early December|
|Second court hearing / scheme effective||Early December|
|Implementation date||Mid December|
All dates and times are indicative only and subject to change. Unless otherwise specified, all times and dates refer to Sydney time.
Further details of the Transaction are provided in a presentation that has also been released to the ASX today.
Announcement authorised by the Board