Rising Debt and Accounting Changes Pose Questions for Charter Hall Long WALE REIT

Robust Profit Growth Amid Strategic Moves

Charter Hall Long WALE REIT (CLW) has delivered a remarkable statutory profit of $153.6 million for the half year ended 31 December 2025, representing a 209.1% increase compared to the prior corresponding period. This surge was largely driven by significant net fair value gains on investment properties, which contributed $118.5 million to the result.

Operating earnings, a key internal performance measure that excludes non-cash and unrealised items, remained stable at $90.6 million, a slight 0.9% increase from the previous half. This consistency underpins the REIT’s declared distribution of 12.75 cents per stapled security, up 2% from 12.50 cents, reflecting a steady income stream for investors.

Portfolio Expansion and Asset Management

The REIT actively expanded its portfolio during the period, completing acquisitions worth approximately $306 million. Notable purchases include interests in government and corporate properties such as the Department of Defence in Canberra, Australian Border Force in Victoria, and Westpac’s Kogarah office in New South Wales. These acquisitions align with the REIT’s focus on long WALE (Weighted Average Lease Expiry) assets, which provide stable, inflation-linked rental income.

Conversely, the REIT disposed of a single asset, Coles Dohertys Road in Truganina, Victoria, for $71.4 million, streamlining its holdings and recycling capital. This active portfolio management supports the REIT’s strategy to optimise asset quality and returns.

Financial Position and Capital Management

Charter Hall Long WALE REIT’s net tangible assets per security increased to $4.68, up from $4.59 six months earlier, reflecting the portfolio’s enhanced value. The gearing ratio rose modestly to 34.3%, supported by an increase in borrowing capacity by $70 million, providing flexibility for future investments or refinancing needs.

In a significant post-reporting event, the REIT’s 50% owned CH LEP Holding Trust secured a $750 million debt facility and plans a capital return of approximately $690 million to investors. CLW intends to use its share of these proceeds to repay $200 million of debt, including $100 million of current borrowings, by the end of February 2026, which will reduce near-term refinancing risk.

Accounting Changes and Market Context

CLW has early adopted the new accounting standard AASB 18, which changes the measurement of joint ventures and associates from the equity method to fair value through profit or loss. This shift enhances transparency around income generated from these investments but also means prior period comparatives have been restated, complicating trend analysis.

The REIT continues to navigate an uncertain economic environment marked by geopolitical tensions, inflationary pressures, and fluctuating interest rates. Its portfolio benefits from inflation-linked leases and interest rate hedging strategies, which provide some insulation against volatility.