Market Discounts Charter Hall Long WALE REIT Despite Strong Portfolio and Earnings
Charter Hall Long WALE REIT has reported steady earnings growth and a significant portfolio valuation uplift in its half-year results, reaffirming its FY26 guidance despite trading at a notable discount to net tangible assets.
- Operating earnings rose 2.0% to $90.6 million
- Net tangible assets increased 2.0% to $4.68 per security
- Portfolio valuation uplift of $139 million on 86% of assets
- Completed $376 million in net property transactions
- Reaffirmed FY26 distribution guidance with 6.8% yield
Solid Earnings and Portfolio Growth
Charter Hall Long WALE REIT (ASX, CLW) has delivered a steady performance in the first half of fiscal 2026, reporting operating earnings of $90.6 million, a 2% increase compared to the same period last year. Distributions were maintained at 12.75 cents per security, reflecting consistent income generation from its portfolio of long-term leased properties.
The REIT’s net tangible assets (NTA) per security rose by 2% to $4.68, signalling a modest but meaningful increase in underlying asset value. This was underpinned by a net property valuation uplift of $139 million, or 2.8%, on 86% of the portfolio independently valued during the period. The weighted average capitalisation rate remained stable at 5.4%, indicating steady market conditions for the REIT’s assets.
Strategic Transactions and Portfolio Composition
During the half, Charter Hall Long WALE REIT completed $376 million in net property transactions, including acquisitions and divestments. Notably, it acquired a near 50% stake in the $440 million Coles CoreWest Distribution Centre in Melbourne, a super-prime facility pre-committed to Coles on a 20-year lease. This acquisition aligns with the REIT’s focus on long WALE net lease assets with blue-chip tenants.
The portfolio remains highly occupied at 99.9%, with a weighted average lease expiry (WALE) of 9.2 years, underscoring the stability and longevity of income streams. Approximately half the portfolio consists of triple net leases with fixed and CPI-linked rental escalations, providing a natural hedge against inflation and reducing capital expenditure requirements compared to peers.
Balance Sheet Strength and Credit Rating
Charter Hall Long WALE REIT’s balance sheet remains robust, with gearing at 29.8%, comfortably within its target range of 25% to 35%. The REIT completed $701 million in accretive debt initiatives, including new facilities with extended terms and improved pricing, alongside $1.1 billion in new interest rate hedging to cover 80% of forecasted debt for the second half of FY26.
Moody’s reaffirmed the REIT’s Baa1 investment grade rating in December 2025, reflecting confidence in its credit profile and risk management. This rating supports the REIT’s ability to access capital on favourable terms, an important factor given the current economic environment.
Outlook and Market Valuation
Despite these positive fundamentals, Charter Hall Long WALE REIT’s securities trade at a 20% discount to its reported NTA per security. The management team views this as an undervaluation, highlighting the REIT’s strong inflation-linked income profile and long lease durations as key differentiators in the market.
Looking ahead, the REIT reaffirmed its FY26 guidance with operating earnings and distributions per security expected to reach 25.5 cents, implying a distribution yield of 6.8% based on recent security prices. This yield remains attractive for investors seeking stable, long-term income from commercial real estate.
Bottom Line?
Charter Hall Long WALE REIT’s steady growth and strong portfolio fundamentals set the stage for potential market re-rating if investor sentiment shifts.
Questions in the middle?
- Will the market narrow the discount to NTA given the REIT’s strong fundamentals?
- How will upcoming property completions, like the Coles CoreWest Distribution Centre, impact future earnings?
- What risks could affect the REIT’s long WALE portfolio amid changing economic conditions?
