Charter Hall Long WALE REIT Cuts Debt by $300M, Declares 25c Distribution

• Statutory profit turnaround to $118.3 million from prior year loss
• Operating earnings slightly down to $178.6 million
• Distributions steady at 25.0 cents per stapled security
• Debt facilities reduced by $300 million and extended maturities
• Post-year acquisitions include key government-related assets

Financial Turnaround and Operating Performance

Charter Hall Long WALE REIT (CLW) has delivered a significant financial turnaround for the year ended 30 June 2025, reporting a statutory profit of $118.3 million compared to a $510.9 million loss in the previous year. Operating earnings, a key internal performance metric that adjusts for non-cash and one-off items, stood at $178.6 million, a modest 5% decline from $188.0 million in FY24.

Despite the dip in operating earnings, the REIT declared distributions of 25.0 cents per stapled security, consistent with the prior year’s payout, reflecting the board’s confidence in the underlying cash flows and portfolio stability.

Portfolio Composition and Asset Management

The REIT’s portfolio remains focused on long weighted average lease expiry (WALE) assets, primarily in industrial and commercial property sectors across Australia and New Zealand. The portfolio includes both directly held properties and interests in joint ventures, with top tenants including Endeavour Group, government entities, Telstra, BP, and Coles.

During the year, the REIT made selective acquisitions such as a 50% interest in Narrabeen Sands Accommodation and BWS Crows Nest, while divesting the Ingham's portfolio and other assets. Post year-end, the REIT expanded its government-related holdings with acquisitions including a 49.9% interest in CH Defence Holding Trust and full ownership of Kogarah Trust, reflecting a strategic tilt towards stable, long-term government leases.

Capital Management and Debt Strategy

Charter Hall Long WALE REIT actively managed its capital structure, reducing total debt facilities by $300 million and extending $310 million of debt maturities to 2029. The REIT’s balance sheet gearing improved to 31.4%, comfortably within its target range of 25-35%. Interest rate risk is well hedged, with 88.8% of debt exposure covered by interest rate swaps, providing protection against rising rates.

The REIT also repurchased and cancelled approximately 12.8 million stapled securities during the year, returning $50 million to the market and enhancing per security metrics.

Risk Management and Operational Focus

The REIT continues to monitor key risks including property market cycles, interest rate volatility, and operational risks such as cyber security and workplace health and safety. Its climate strategy remains aligned with Australian Sustainability Reporting Standards, maintaining net zero emissions for scope 1 and 2 since FY24 and investing in renewable energy across its assets.

Governance remains robust with a board comprising experienced directors and a responsible entity, Charter Hall WALE Limited, overseeing compliance and strategic direction.

Outlook and Market Positioning

While the REIT’s results reflect resilience amid uncertain economic conditions, the outlook remains sensitive to geopolitical events, inflation, and interest rate movements. The REIT’s focus on long WALE assets with inflation-linked leases and active hedging positions it to navigate these challenges. The recent acquisitions of government-leased properties may further enhance portfolio stability and income security.

Bottom Line?

Charter Hall Long WALE REIT’s FY25 profit recovery and disciplined capital management set the stage for cautious optimism amid evolving market risks.

Questions in the middle?

• How will rising interest rates impact the REIT’s operating earnings and distributions going forward?
• What are the implications of related party transactions in recent acquisitions for governance and valuation?
• Will the REIT activate its Distribution Reinvestment Plan to support growth or capital management?