This article is from the Australian Property Journal archive
CONVENIENCE retail centre and petrol station landlord Charter Hall Retail REIT has invested $42 million into a long weighted average lease expiry (WALE) partnership with superannuation fund Hostplus.
CQR has taken an 18% interest in the Long WALE Investment Partnership 2 (LWIP2), contemporaneous with the acquisition of two additional assets leased to ASX-listed hotels and bottle shops operator Endeavour Group by LWIP2.
LWIP2 is an existing Charter Hall partnership that now consists of eleven Endeavour Group leased retail assets, with six located in Queensland, making up 32% of portfolio value, three in Victoria (48% of portfolio value) and two in South Australia (20% of portfolio value).
The portfolio has initial 15-year triple-net leases, the majority of which have uncapped CPI annual rent escalations, whilst ten of the properties include Endeavour-branded off-premise bottle shops – three Dan Murphy’s and seven BWS.
CQR is forecasting a year-one passing yield of greater than 4.7% from its investment.
The transaction has been funded by reinvesting the sale proceeds from October’s disposal of Allenstown Square, at its book value of $58.8 million.
Endeavour Group becomes one of CQR’s top ten tenants following the deal, representing 1.4% of its portfolio income. In addition, the LWIP2 investment further increases CQR’s exposure to NNN CPI-linked leases, taking overall portfolio income directly linked to CPI from 23% to 24% and total portfolio income directly or indirectly linked to CPI to 60%.
CQR has the ability to equalise ownership in the partnership over time via further investment to diversify the portfolio through acquisitions, as agreed with Hostplus.
“Our ongoing portfolio curation continues to improve the organic growth in CQR while strengthening the resilience of our income through growing our exposure to major tenant retailers. We look forward to growing this partnership with Hostplus and continuing to deliver a resilient and growing income stream for CQR unitholders,” said Ben Ellis, Charter Hall Retail CEO.
CQR reaffirmed its FY23 earnings per unit guidance of no less than 28.7c, showing at least 1% growth over FY22, and distributions are expected to be no less than 25.8c per unit, representing growth of 5.3%.
In August, CQR offloaded its share in an Adelaide Coles distribution centre for $150 million and used the funds to acquire a near-half-stake of a portfolio of 51 fuel stations in New Zealand, on a 5.50% capitalisation rate.
