Banner image
Half Year Report 2018

LONG TERM
PERFORMANCE

Delivering Long Term Performance

This solid result reflects the active management approach we take to maintain long term, sustainable returns for our investors. We are pleased to deliver Operating EPS of 13.0 cents or 1.8% above the PDS 1H FY18 forecast.

1H FY18
HIGHLIGHTS

AUSTRALIAN PROPERTIES

811

OCCUPANCY

100%

PORTFOLIO WALE

11.3yrs

$1.5b

Portfolio Value

$21 million gross property valuation uplift

4.8yrs

Weighted Average Debt Maturity

28.6%

gearing2 within target range of 25% – 35%

  1. Metrics include Virgin Australia Head Office which was acquired 4 January 2018.
  2. Reflects pro-forma 31 December 2017 balance sheet gearing adjusted for the settlement of Virgin Australia Head Office.

OUR
STRATEGY

We aim to provide investors with stable and secure income and target income and capital growth through an exposure to a Long Weighted Average Lease Expiry (WALE) portfolio of properties.

We are growing the portfolio across multiple real estate sectors for diversification benefits with a clear focus on high quality assets leased to tenants with strong covenants on long term leases.

FINANCIAL
PERFORMANCE

13.0cents
operating EPS
1.8% above PDS 1H FY18 forecast
13.7cents1
DPS
6.9% above PDS 1H FY18 DPS forecast
$4.02
NTA per security
2.2% increase since June 2017

PORTFOLIO
PERFORMANCE

$96.8m
of net property acquisitions
$21.0m
gross property valuation uplift
Mid-term market rent review
underway with at ATO at 12-26 Franklin St, Adelaide

CAPITAL
MANAGEMENT

$101.6m of new equity
successfully raised via DRP and entitlement offer
4.8yrs and 5.2yrs
weighted average debt maturity & hedging maturities respectively
$95.0m2
Undrawn debt and cash
  1. DPS is greater than EPS for the period as a result of the December 2017 entitlement offer.
  2. Adjusted for Virgin Australia Head Office acquisition and includes available cash in LWIP and other joint ventures.

AVI
ANGER

Fund Manager - Long WALE REIT

HALF YEAR FUND
MANAGERS REPORT

Charter Hall Long WALE REIT has posted a positive interim result for the six months to 31 December 2017, reflecting Charter Hall’s active management approach to maintain long-term, sustainable investment returns.

The REIT posted a statutory profit of $45.9 million for period, underpinned by operating earnings of $27.3 million. The interim distribution of 13.7 cents per share1 for the period was 6.9% above the PDS 1H FY18 forecast.

  1. DPS is greater than EPS for the period as a result of the impact of the December 2017 entitlement offer.

VIEW THE LETTER

The performance of the portfolio is consistent with the REIT’s strategy of providing investors with stable and secure income and targeting both income and capital growth, via an exposure to a high quality, diversified portfolio of Long WALE properties.”

HALF YEAR FUND
MANAGERS REPORT

Dear securityholders,

Charter Hall Long WALE REIT has posted a positive interim result for the six months to 31 December 2017, reflecting Charter Hall’s active management approach to maintain long-term, sustainable investment returns.

The REIT posted a statutory profit of $45.9 million for period, underpinned by operating earnings of $27.3 million. The interim distribution of 13.7 cents per share1 for the period was 6.9% above the PDS 1H FY18 forecast.

Accretive acquisitions, active leasing and positive revaluations

The REIT’s portfolio value grew 8.4% during the period, driven by strategic acquisitions and $21 million in gross property revaluations, with the property portfolio growing 8.4% to $1.52 billion2. This delivered an increased NTA of 2.2% to $4.02 per security.

During the period, the REIT completed a successful accelerated non-renounceable entitlement offer, which raised $94.1 million of new equity to fund a 100% interest in Virgin Australia's head office at 56 Edmondstone Road, Brisbane. The A-Grade freehold asset comprises approximately 12,500sqm of net lettable area across three low-rise office buildings and is 100% leased to Virgin Australia with an 8.4 year WALE at settlement.

The acquisition of the Virgin Australia Head Office improves the sector, geographic, tenant and tenant industry diversification of the REIT's portfolio and the 3.5% annual fixed rent reviews contributes to the earnings growth profile of the REIT.

For further information on the Virgin Australia office acquisition, refer to the Case Study section on this micro site.

The REIT also completed a five-year lease extension with Electrolux Home Products Pty Limited at 76 – 80 Howards Road, Beverley, South Australia. As a result, the expiry date of this lease has been extended from December 2024 to December 2029 and the lease term remaining at this property has increased to 11.9 years.

During the period, 46 properties were independently valued (c.39% of the portfolio by value) which resulted in a total gross uplift of $21.0 million, reflecting a 1.5% increase on prior book values. This valuation growth, in conjunction with strategic acquisitions and lease extensions, resulted in the REIT’s portfolio valuation growing 8.4% to $1.52 billion, reflecting a $118 million increase to 31 December 20173. At the end of the period, the REIT’s diversified portfolio remains 100% occupied and the portfolio’s weighted average capitalisation rate (WACR) firmed marginally to 6.17%.

Strengthened the REIT’s capital position

The REIT completed a number of capital management initiatives during the period, which have expanded the debt platform and bolstered the overall strength of its capital position. These initiatives include:

  • Balance sheet debt facility limit increase of $20 million to $470 million and maturity date extension to February 2022; and
  • Successful completion of the accelerated non-renounceable entitlement offer, raising $94.1 million of new equity to fund the acquisition of the Virgin Australia Head Office and associated transaction costs.

As a result, key metrics as at 31 December 2017 include:

  • Undrawn debt and cash of $95 million4;
  • Weighted average cost of debt is 4.1%;
  • Weighted average debt maturity term of 4.8 years; and
  • Weighted average hedge maturity of 5.2 years.

These initiatives are consistent with the REIT’s strategy to reduce impacts from interest rate fluctuations and maintain a conservative capital structure with balance sheet gearing at 31 December 2017 of 23.3%. When adjusted for the settlement of Virgin Australia Head Office, this results in pro-forma balance sheeting gearing of 28.6%, remaining within the 25% to 35% target range.

Strategy and outlook

Management continues to focus on actively managing the REIT to create value and deliver sustainable and growing returns for investors. Barring any unforeseen events and no material change in current market conditions, CLW’s guidance for FY18 Operating EPS remains unchanged at 26.4 cents, representing:

  • 3.9% growth over FY17 annualised Operating EPS; and
  • 3.1% ahead of PDS target FY18 annualised Operating EPS of 25.6 cents The target distribution payout ratio remains at 100% of Operating Earnings.

The target distribution payout ratio remains at 100% of operating EPU.

  1. DPS is greater than EPS for the period as a result of the impact of the December 2017 entitlement offer.
  2. Includes Virgin Australia Head Office.
  3. Includes Virgin Australia Head Office.
  4. As at 31 December 2017 and adjusted for Virgin Australia Head Office acquisition settlement.
AVI
ANGER
Fund Manager - Long WALE REIT

CASE
STUDIES

Virgin Australia Head Office acquisition

The acquisition of Virgin’s Head Office improves portfolio diversification by the addition of another high quality ASX-listed tenant.

PORTFOLIO UPDATE

The REIT continues to develop its close tenant relationships to enhance the leasing profile of the portfolio.

Virgin Australia Head Office acquisition

Improves portfolio diversification, eastern seaboard exposure and increases office exposure.

  • In December 2017, CLW agreed to acquire the head office of Virgin Australia in Brisbane, Queensland
    • – 100% occupied with an 8.4 year WALE
    • – 12,427 sqm of A-grade office space
    • – 6.8% acquisition capitalisation rate
  • The acquisition was settled 4 January 2018

  • In conjunction with the transaction, the REIT successfully completed an accelerated non-renounceable entitlement offer, which raised $94.1 million of new equity to fund the acquisition and associated transaction costs

Portfolio update

CLW continues to develop its close tenant relationships to explore future potential leasing opportunities.

Management is pleased to provide the following updates on CLW's portfolio for this period:

Electrolux Beverley, SA

  • Early five year extension over entire 25,562 sqm facility
  • Increases lease term remaining from 6.9 years to 11.9 years
  • Improves portfolio lease expiry profile


Australian Tax Office Adelaide, SA

  • Australian Tax Office (‘ATO’) has exercised the mid-term market rent review
  • The review process is now underway and CLW is working with the ATO in accordance with the lease terms


Hoppers Crossing Distribution Centre, Hoppers Crossing, VIC

  • CLW continues to receive leasing enquiries for this property
  • Tenant continues to pay rent for remainder of lease
  • 3 year WALE

PORTFOLIO
PERFORMANCE

Since listing, CLW has increased its exposure to the eastern seaboard of Australia, with 54% of the portfolio by valuation located in this region.

PORTFOLIO SNAPSHOT

Dec 20171 Jun 2017
Number of properties 81 80
Property valuation (A$m) 1,515.5 1,397.2
Weighted Average Capitalisation Rate (“WACR”) 6.2% 6.2%
Occupancy 100% 100%
Weighted Average Lease Expiry (“WALE”) 11.3yrs 11.8yrs
Proportion of income subject to fixed rental increases 64% 62%
Weighted Average Rental Review2 (“WARR”) 2.8% 2.9%
  1. Includes Virgin Australia Head Office which was acquired 4 January 2018.
  2. Includes CPI reviews completed during the period.


Portfolio by Sector



Tenant Industries



Lease Expiry Profile

OUR BOARD
AND MANAGEMENT