This article is from the Australian Property Journal archive
POSTING lumpy first-half numbers, Charter Hall’s convenience retail and petrol station REIT is expecting positive leasing spreads, high occupancy levels and MAT growth to continue, and continued its portfolio reshaping with the acquisition of Eastgate Bondi Junction from ISPT and another $65 million worth of divestments.
The Charter Hall Retail REIT (CQR) said it had offloaded a run of $290 million worth of assets “following unsolicited off-market offers”. Rosebud Plaza and Southgate Square were sold late in 2023 for a combined $225.5 million, and CQR said it has now also sold Dickson Woolworths and Sydney Street Markets in Queensland’s Mackay.
“The sale of these four assets in-line with prevailing book values demonstrates the resilience and attractiveness of CQR’s assets and also suggests the cap rate expansion cycle for convenience retail assets is nearing an end,” said Charter Hall Retail’s CEO, Ben Ellis.
The trust bought Eastgate Bondi Junction from ISPT, one of only three sub-regional shopping centres in Sydney’s prized eastern suburbs was acquired in partnership with RP6. CQR took a 20% interest at $25 million.
The sale is part of ISPT’s portfolio realignment strategy, having already sold the Brisbane home of fast fashion giants H&M and Uniqlo for $145 million, as it shifts away from the office and retail sectors towards industrial, health and life sciences.
Among the properties is Melbourne’s GPO building, also home to an H&M flagship store. The Strand Melbourne, Halls Head Central WA, Eastgate Bondi Junction, and the vacant office building at 270 Pitt Street are also on the block.
“This is an outstanding acquisition for CQR, acquiring a premium investment grade convenience retail centre on an attractive 6.1% passing yield,” Ellis said.
“This continues our ongoing portfolio curation and further concentrates CQR’s portfolio in major east coast metropolitan markets. It’s also pleasing to see new incremental wholesale capital investing in convenience retail shopping centres, recognising the attractive nature of this asset class.”
Located opposite Westfield Bondi Junction, the 15,046 sqm centre has car parking for 907 vehicles and is 150 metres of Bondi Junction train and bus station. The centre is anchored by a full-line Coles, Kmart and Aldi, has two mini-majors in Dan Murphy’s and The Reject Shop, and 27 specialty retail tenancies.
CQR’s portfolio is weighted towards major convenience retail tenants. Woolworths, Coles, BP, Wesfarmers, Aldi, Ampol, Endeavour and Gull represent 58% of its rental income. The total portfolio weighted average lease expiry (WALE) is 7.1 years and majors WALE is 10.0 years.
“Portfolio curation and active asset management will continue to enhance the portfolio quality through time,” CQR said in its interim results.
The REIT swung to a $42.1 million loss, from a statutory profit of $124.7 million.
Operating earnings for the half came in at $78.6 million, or 13.52c per unit. That was down from the pcp’s $83.4 million, at 14.35c.
CQR recorded positive specialty leasing spreads of 1.2% on the prior corresponding period (pcp), driven 102 specialty lease renewals with a 1.6% leasing spread. Seventy new leases were struck with a 0.1% leasing spreads.
Like-for-like net property income (NPI) growth was 3.7% with shopping centre like-for-like NPI growth of 3.3% and net lease retail like-for-like growth of 5.7%.
“Positive leasing spreads, high occupancy levels and MAT growth are expected to continue. Portfolio income is expected to benefit from direct and indirect inflation-linked rental growth, which will also underpin asset values,” CQR said.
It posted record-high shopping centre portfolio occupancy of 98.7%, up from 98.6% six months earlier.
Distributions were 12.3c per unit, down from 13.0c.
