This article is from the Australian Property Journal archive
THE Charter Hall Social Infrastructure REIT (CQE) has acquired a pathology lab in Perth occupied by a subsidiary of ASX-listed Sonic Healthcare Group for $47 million, while the trust also upgraded its full-year distributions guidance as it looks ahead to market reviews on a chunk of its portfolio in the coming years.
CQE is now forecasting distributions of 15.2c per unit, up from 15.0c per unit.
Its new acquisition – settlement has already occurred – reflected 6.4% initial yield. Clinipath Pathology has a triple-net lease over the Osborne Park asset with 8.2 years remaining, which includes annual CPI-linked rent reviews capped at 3.5% with ratchet provisions.
Refurbished in 2014, the laboratory services the entirety of Clinipath’s Western Australian operations with samples collected from across the state.
The property features approximately 5,000 sqm of net lettable area, with 82% dedicated to laboratory space, and offers 245 on-grade car spaces. It occupies a 1.5-hectare site that CQE said presents significant future development and expansion potential. JLL handled the sale.
“Active portfolio curation remains a key strategy for CQE to deliver earnings and distribution growth. The acquisition of a pathology laboratory in Western Australia leased to Clinipath Pathology at a 6.4% yield is consistent with our strategy to invest in social infrastructure property delivering essential community services,” said CQE fund manager, Travis Butcher.
The purchase was funded through the divestment of 16 childcare assets throughout the half for a total consideration of $84 million, at an average yield of 4.6%.
CQE’s $2.1 billion portfolio is 100% occupied and has an 11.9-year weighted average lease expiry, significant rental growth potential through market reviews on 43% of the portfolio’s income over the next four years. Recent market rent reviews on 15 properties delivered a 16.4% increase, highlighting the under-rented nature of CQE’s childcare portfolio”, it said.
During the period, 59% of the operational property portfolio by gross asset value was independently valued at a passing yield of 5.3%, a tick upwards over six months. This resulted in a 0.5%, or $6.4 million increase on like-for-like June book values, “reflecting the resilient nature of CQE’s portfolio, ongoing demand for social infrastructure assets and positioning of the sector”.
“We expect that there will continue to be significant growth opportunities in social infrastructure assets, driven by favourable demographic trends and the essential nature of the industry, including government backing,” it said.
Interim operating earnings was $28.5 million, or 7.6c per unit, slightly down from $29.6 million 8.0c per unit in the prior corresponding period. Distributions were 7.5c per unit, down from 8.0c.
Statutory earnings swung to the positive, from a loss of $10.9 million a year ago to $31 million.
Net tangible assets was $3.82 per unit.
