Charter Hall Long WALE REIT Delivers Steady Growth and Strategic Portfolio Moves in 1H FY25
Charter Hall Long WALE REIT reported solid first-half results for FY25, maintaining strong portfolio occupancy and lease terms while executing significant asset sales and strategic acquisitions. The REIT reaffirmed its full-year earnings and distribution guidance, underscoring confidence in its long-term growth strategy.
- Operating earnings of $89.8 million and distributions of 12.5 cents per security
- Portfolio occupancy at 99.8% with a weighted average lease expiry of 9.7 years
- Completed $300.4 million in asset divestments and $11.5 million in strategic acquisitions
- Executed lease expansion and extension with Coles at Perth Airport Distribution Centre
- Reaffirmed FY25 guidance with a 6.4% distribution yield based on current pricing
Robust Financial Performance Amid Strategic Portfolio Management
Charter Hall Long WALE REIT (ASX: CLW) has reported a steady and confident start to FY25, delivering operating earnings of $89.8 million for the six months ending December 31, 2024. This translates to 12.5 cents per security, matching the distribution paid over the period and reflecting the REIT’s commitment to consistent income generation for investors.
The REIT’s net tangible assets stood at $4.62 per security, while statutory earnings were reported at $51.3 million. These figures underscore a stable financial footing, supported by a portfolio that continues to perform well operationally.
Portfolio Strength and Lease Profile
Occupancy remains exceptionally high at 99.8%, a testament to the quality and desirability of CLW’s diversified property holdings. The portfolio’s weighted average lease expiry (WALE) of 9.7 years provides long-term income visibility, a key attraction for investors seeking defensive real estate exposure.
Like-for-like net property income grew by 3.5%, driven by a balanced mix of fixed and CPI-linked rental increases. This growth reflects the REIT’s ability to maintain rental momentum despite broader market uncertainties.
Strategic Asset Sales and Targeted Acquisitions
During the half, CLW completed $300.4 million in asset divestments, including the sale of the Inghams agri-logistics portfolio for $225.3 million and stakes in the Australian Red Cross and bp Australia Armadale Service Centre. These divestments align with the REIT’s strategic focus on high-quality, long WALE assets.
On the acquisition front, CLW invested $11.5 million in two Endeavour Group-leased hospitality assets adjoining existing holdings in northern Sydney. These purchases, including the Narrabeen Sands Hotel accommodation and BWS Crows Nest, both secured under long-term leases, demonstrate a targeted approach to portfolio consolidation in growth corridors.
Lease Expansion with Coles Signals Active Asset Management
A notable highlight was the execution of a lease expansion and 12-year extension with Coles at its Perth Airport Distribution Centre. This deal not only future-proofs the asset but also exemplifies CLW’s proactive collaboration with tenants to enhance property value and secure income streams.
Capital Management and Credit Profile
CLW’s balance sheet remains robust with gearing at 31.8%, comfortably within its target range. The REIT refinanced $310 million of debt, extending maturities and maintaining a weighted average debt maturity of four years. Moody’s reaffirmed CLW’s Baa1 investment grade rating, reflecting confidence in the REIT’s financial discipline and credit quality.
Outlook and Guidance
Looking ahead, Charter Hall Long WALE REIT reaffirmed its FY25 operating earnings and distribution guidance at 25.0 cents per security. Based on recent pricing, this equates to a distribution yield of 6.4%, offering an attractive income proposition for investors in a low-yield environment.
With a diversified $5.5 billion portfolio, high occupancy, and long lease durations, CLW appears well-positioned to navigate market challenges while delivering steady returns.
Bottom Line?
CLW’s disciplined portfolio reshaping and strong lease profile set the stage for sustained income growth amid evolving market conditions.
Questions in the middle?
- How will the recently acquired Endeavour Group assets contribute to income growth and portfolio diversification?
- What impact will the Coles lease expansion have on future rental income and asset valuation?
- How might rising interest rates or economic shifts affect CLW’s debt refinancing strategy and distribution sustainability?
