Charter Hall Social Infrastructure REIT (CQE) reported a robust half-year performance with a 51.6% jump in statutory profit and upgraded its FY26 distribution guidance, underpinned by strategic acquisitions and refinancing.
- Statutory profit up 51.6% to $47 million
- Operating earnings increased 10.2% to 8.5 cents per unit
- Acquisition of 50% stake in Western Sydney University campus
- Early learning assets divested at 4.6% premium to book value
- Successful $900 million debt refinancing with extended maturity
Strong Financial Performance
Charter Hall Social Infrastructure REIT (ASX, CQE) has delivered a compelling half-year result for the six months ending 31 December 2025, showcasing significant growth across key financial metrics. The REIT’s statutory profit surged by 51.6% to $47 million, while operating earnings rose 10.2% to 8.5 cents per unit. Distributions followed suit, increasing 12% to 8.4 cents per unit, reflecting the trust’s robust income-generating capacity.
Net tangible assets per unit edged up 1% to $3.90, signalling steady underlying asset value growth. This performance was supported by a well-executed strategy of portfolio optimisation and capital management.
Portfolio Enhancements and Strategic Acquisitions
During the half, CQE strategically expanded its social infrastructure footprint with a $152 million acquisition of a 50% interest in the Western Sydney University campus in Parramatta. This modern, purpose-built facility is fully leased with a long weighted average lease expiry (WALE) of 16.1 years and benefits from fixed annual rental increases of 3.75%. The acquisition, yielding an initial 6.5%, enhances CQE’s exposure to the education sector and aligns with its focus on high-quality, long-term assets.
Additionally, CQE increased its stake in the Geosciences Australia facility in Canberra to 33.3%, acquiring an 8.3% interest for $28.7 million at an 8.4% yield. This asset, leased to a federal government agency, further diversifies the portfolio into specialised social infrastructure with strong income security.
Portfolio Curation and Divestments
In line with its active portfolio management approach, CQE divested 20 early learning assets for $88.9 million, achieving a 4.6% premium to book value and an average yield of 4.3%. These divestments, predominantly located in Queensland, support the REIT’s strategy to recycle capital from lower-yielding assets into higher-yielding, long WALE social infrastructure properties.
The portfolio now stands at $2.3 billion with an impressive 11.4-year WALE and near-full occupancy of 99.6%. Market rent reviews completed during the half delivered a weighted average uplift of 4.2%, including a notable 6.1% increase on early learning centre leases, underpinning future income growth.
Capital Management and Refinancing
Capital structure improvements were a highlight, with CQE successfully refinancing $900 million of debt facilities in July 2025. The refinancing introduced $450 million in Asian Term Loan facilities, enhancing diversification and flexibility. The weighted average debt maturity extended to 4.4 years, with no maturities until July 2029, and improved pricing and covenant terms were secured.
Gearing remains conservative at 34.1%, with a high proportion of debt hedged at an average rate of 3.2%, providing cost certainty over the near term.
Upgraded Guidance and Outlook
Reflecting confidence in its portfolio and market fundamentals, CQE upgraded its FY26 distribution guidance by 1.2% to 17.0 cents per unit, representing an 11.8% increase on FY25. Operating earnings guidance was also raised to at least 17.2 cents per unit, a 12.4% uplift.
Fund Manager Travis Butcher highlighted the structural tailwinds from population growth and the essential nature of social infrastructure sectors such as education, health, and government services. CQE’s focus on quality assets with long leases and strong tenant covenants positions it well to capitalise on these trends.
Bottom Line?
CQE’s strategic portfolio moves and refinancing set the stage for sustained growth, but investors will watch closely how demographic shifts and market conditions unfold.
Questions in the middle?
- How will CQE balance further acquisitions with divestments to optimise yield and risk?
- What impact might rising interest rates have on CQE’s cost of debt beyond current hedging?
- How resilient are tenant covenants in the early learning sector amid evolving market dynamics?