How Charter Hall’s $144M Acquisitions and $900M Refinancing Fuel Distribution Growth

Strong Financial Performance and Strategic Portfolio Moves

Charter Hall Social Infrastructure REIT (ASX – CQE) has delivered a robust set of full-year results for FY25, underscoring its position as a leading player in Australia’s social infrastructure real estate sector. The REIT reported operating earnings of $57.0 million, translating to 15.3 cents per unit, alongside distributions paid of 15.2 cents per unit. Net tangible assets per unit rose modestly by 1.0% to $3.86, reflecting steady portfolio value growth amid active asset management.

Central to CQE’s strategy has been the deliberate curation of its portfolio, balancing acquisitions of high-quality, long-leased social infrastructure assets with divestments of lower-yielding early learning centres. This approach aims to enhance income sustainability and distribution growth, a goal clearly reflected in the FY25 outcomes.

Key Acquisitions Bolster Portfolio Quality and Income Security

During the year, CQE invested $144.1 million in three significant acquisitions. The purchase of a modern pathology laboratory in Osborne Park, Perth, for $47 million brought a long-term triple-net lease with Clinipath Pathology, a subsidiary of ASX-listed Sonic Healthcare Group. This asset offers a secure income stream with annual CPI-linked rent reviews capped at 3.5%.

Further expanding its higher education exposure, CQE acquired a 22.5% interest in the Western Sydney University campus in Parramatta for $68.4 million. This modern, purpose-built facility benefits from a 16.6-year lease term and strong ESG credentials, including 5-Star Green Star and NABERS ratings. Additionally, CQE increased its stake in the Geosciences Australia facility in Canberra to 33.3%, securing a government-backed tenant with fixed annual rent increases.

Portfolio Divestments and Rental Growth Highlight Market Position

Complementing these acquisitions, CQE divested 30 early learning assets for $151.1 million, achieving an 8.3% premium to book value. This recycling of capital from lower-yielding assets into higher-yielding social infrastructure properties has improved the portfolio’s overall yield profile, now at 5.4% compared to 5.2% the previous year.

Market rent reviews on 69 properties delivered a notable 10.5% uplift, with 28% of rental income subject to market reviews over the next three years. This indicates significant potential for future income growth, particularly given the under-rented status of many early learning centres within the portfolio.

Refinancing Strengthens Capital Structure and Extends Debt Maturity

In July 2025, CQE successfully refinanced its debt facilities, increasing the total facility size to $900 million and introducing a $450 million Asian Term Loan. This refinancing extended the weighted average debt maturity to 4.9 years and improved pricing and covenant terms. Importantly, CQE now faces no debt maturities until July 2029, providing enhanced financial flexibility and stability.

Balance sheet gearing remains conservative at 30.5%, within the target range, supported by increased hedging coverage that locks in attractive interest rates for the next several years.

Outlook – Distribution Growth and Market Opportunities

Looking ahead, CQE has raised its FY26 distribution guidance by 10.5% to 16.8 cents per unit, reflecting confidence in ongoing rental growth and portfolio quality. The Fund Manager, Travis Butcher, emphasised the continued focus on acquiring essential social infrastructure assets with strong tenant covenants and growth potential, supported by favourable demographic trends and government backing.

With a portfolio valued at $2.1 billion, 100% occupancy, and a long weighted average lease expiry of 11.6 years, CQE appears well positioned to deliver sustainable income and capital growth for investors.