Charter Hall Social Infrastructure REIT Delivers 13% Earnings Growth and Portfolio Expansion

Strong Earnings and Distribution Growth

Charter Hall Social Infrastructure REIT (CQE) has reported a 13.1% increase in operating earnings per unit (EPU) to 17.3 cents for the financial year ended 30 June 2026. Distributions per unit rose 11.8% to 17.0 cents, supported by a resilient portfolio and disciplined capital management. Net tangible assets per unit increased 1.8% to $3.93, reflecting steady underlying asset appreciation.

Statutory profit climbed to $90.5 million, up from $71.0 million the prior year, buoyed by fair value gains on investment properties and derivative instruments. Operating earnings, a key management metric excluding non-cash and non-recurring items, rose to $64.2 million from $57.0 million.

Portfolio Expansion and Quality Enhancement

CQE continued to refine its portfolio with $291.9 million of property acquisitions at an average yield of 6.2%, including a 50% interest in a Western Sydney University campus for $152 million and a 25% stake in a Brisbane pathology laboratory leased to Sonic Healthcare under a 20-year triple-net lease. These assets extend the portfolio's weighted average lease expiry (WALE) to 11.4 years and diversify income streams beyond early learning centers.

Simultaneously, CQE divested 32 early learning properties for $136.7 million at an average 4.4% yield, completing sales at a 4.1% premium to book value. This capital recycling supports the REIT’s strategy to pivot towards larger, institutional-grade social infrastructure assets, with income from non-early learning assets now representing 39% of portfolio income.

The portfolio’s valuation rose 9.6% year-on-year to $2.3 billion, underpinned by strong occupancy of 99.7% and weighted average rent reviews of 3.8%. Early learning assets achieved a 6.4% average increase on 91 market rent reviews, illustrating robust organic growth.

Prudent Capital and Risk Management

Balance sheet gearing stood at a conservative 33.7%, comfortably below the midpoint of CQE’s 30-40% target range. The REIT successfully refinanced its $900 million debt platform in July 2025, extending maturities to June 2029 and increasing borrowing capacity by $50 million. Interest rate hedging covers 73% of debt in FY27 and 50% in FY28, mitigating exposure to rising rates.

Tenant concentration remains a focus, with Goodstart Early Learning Limited accounting for 24% of rental income. The REIT monitors tenant financial health closely and is actively diversifying its tenant base to reduce sector-specific risks.

Governance and Board Renewal

FY26 saw significant Board renewal. Bevan Towning was appointed Chair in May 2026, succeeding Greg Paramor AO who retired after a pivotal tenure. Glenn Fraser joined as Independent Non-Executive Director and Chair of the Audit, Risk and Compliance Committee, bringing extensive finance and infrastructure experience. David Harrison, Charter Hall Group’s CEO, joined as Executive Director in August 2026, further strengthening governance alignment.

Sustainability Progress and Climate Strategy

CQE advanced its sustainability agenda, achieving net zero Scope 1 and 2 emissions for assets under operational control, supported by over 1.4MW of installed solar capacity and renewable electricity sourcing. The REIT aligns with Charter Hall’s climate strategy targeting 100% renewable electricity and a 50% reduction in tenant emissions intensity by 2030 against a FY22 baseline.

Climate risk assessments are integrated into acquisition due diligence and portfolio management, focusing on both transition and physical risks. CQE’s sustainability approach is embedded in executive incentives and operational practices, reflecting growing investor expectations.

Accounting Changes and Audit Assurance

In FY26, CQE early adopted the new accounting standard AASB 18, transitioning joint venture and associate investments to fair value through profit or loss measurement. This change enhances transparency but affects comparability with prior periods.

Ernst & Young provided an unqualified audit opinion, highlighting key audit matters around investment property valuations and the fair value of unlisted property funds. The audit confirmed the robustness of valuation methodologies and key assumptions underpinning CQE’s $2.3 billion portfolio.

The REIT’s strategy remains focused on income resilience, capital growth, and portfolio quality enhancement, positioning it to navigate evolving market conditions and deliver sustainable returns.