Release Date: February 06, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Charter Hall Long WALE REIT (ASX:CLW, Financial) has a diversified real estate portfolio valued at $5.5 billion, with a high occupancy rate of 99.8% and a weighted average lease term of 9.7 years.
- The REIT achieved a 3.5% like-for-like net property income growth, benefiting from 54% of its income being CPI-linked.
- The portfolio is secured by long leases to blue-chip tenants, with 99% of tenants being government, ASX-listed, multinational, or national businesses.
- The REIT completed a $50 million buyback of securities, demonstrating strong capital management and maintaining a gearing ratio within the target range.
- Moody's reaffirmed the REIT's BAA1 investment-grade credit rating, indicating financial stability and strong creditworthiness.
Negative Points
- The REIT's net tangible assets per security remained relatively stable, with minor reductions due to property revaluations and interest rate swap movements.
- There was a 17.5% reduction in operating expenses and a 15.6% reduction in finance costs, primarily due to divestment activities, which may impact future income streams.
- The REIT's weighted average cost of debt increased slightly from 4% to 4.1%, indicating rising financing costs.
- The REIT completed $289 million of net property divestments, which could potentially limit future growth opportunities.
- The REIT's portfolio cap rate has increased by 100 basis points over the past 2.5 years, reflecting potential challenges in maintaining property valuations.
Q & A Highlights
Q: Regarding the buyback completed in the first half, is there a weaker moving part since guidance remains unchanged?
A: No, the guidance includes the impact of the buyback, which was done at a 6.4% yield. It has an immaterial impact, so the $0.25 guidance remains unchanged. The full impact will be seen in FY26. - Scott Martin, Head of Finance
Q: Have there been any changes to debt covenants, and where do you stand against them?
A: No changes have been made to the covenants. We continue to monitor balance sheet and look-through gearing metrics, which have materially reduced due to the sales program. Valuations have remained stable, so there is no material change to covenant metrics since June. - Scott Martin, Head of Finance
Q: Did you consider extending the buyback given the 15% discount to NTA?
A: We completed the $50 million buyback as announced, using excess proceeds from our divestment program. There is no intention to extend it further at this stage, as it impacts gearing. - Avi Anger, Fund Manager
Q: Can you provide an indication of the costs for the Perth airport shed expansion?
A: The cost for our 49.9% share is just under $30 million. We are not disclosing the yield on cost, but it is well above our cost of debt, making it a positive impact for CLW. - Avi Anger, Fund Manager
Q: What are the costs assumed in guidance for this year?
A: We have rolled three-quarters of our floating rate debt exposure at around 4.4%. The remaining quarter rolls in March, and we do not forecast a material reduction in that Q4 debt role. - Scott Martin, Head of Finance
Q: Can you update on the A LE portfolio underrenting situation?
A: At the time of the A LE transaction in late 2021, rents were about 37% below market levels. We haven't updated since, but they are at least that today. The market rent review is in 2028, and we will realize it then unless brought forward. - Avi Anger, Fund Manager
Q: Has the Coles facility extension in WA been reflected in the 31 December carrying value?
A: No, it will be reflected upon completion as we spend the money, adding to the cost base of the asset. It will be valued on completion of the works. - Avi Anger, Fund Manager
Q: Are you considering investing in data centers going forward?
A: We will consider data center assets if presented. The reference to data centers reflects the equipment in our exchange properties and Telstra's edge computing rollout, which may utilize our properties. - Avi Anger, Fund Manager
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
