This article is from the Australian Property Journal archive
THE Charter Hall Long WALE REIT (ASX:CLW) has posted a statutory loss of $510.9 million for FY24, with its portfolio value dropping by $626 million against a high interest rate backdrop.
CLW’s statutory losses expanded from the previous year’s loss of $189 million, as revenue dropped 1.3% to $219.7 million.
Operating earnings also fell over the year, down 7.1% to $188 million or 26 cents per security.
Distributions were at 26 cents per security and net tangible assets were at $4.66 per security.
CLW’s $5.8 billion diversified portfolio of 540 properties boasted an occupancy of 99.9%, WALE of 10.5 years, with a WACR of 5.4% up 63bps from 4.8%.
100% of the portfolio by gross asset value was independently valued during FY24, resulting in the $626 million loss.
Over the financial year, CLW carried out $726.2 million in completed or exchanged divestments.
“CLW has successfully completed a strategic program of divesting assets, reducing near term lease expiry risk, strengthening the balance sheet and curating the portfolio for the future,” said Avi Anger, fund manager at CLW.
“The portfolio at 30 June 2024 now features an increased weighting towards triple-net leases of 55%, occupancy of 99.9% and like for like income growth of 4.7% as a result of an attractive mix of fixed and CPI linked annual increases.”
CLW strengthened its balance sheet position over FY24, with all pro forma gearing metrics reducing, with balance sheet gearing down from 34.5% to 30.1% and look through gearing down from 41.2% to 37.6%.
“The REIT has divested around AUD762 million of assets and used proceeds for debt repayment, materially improving its leverage to within our rating thresholds with sufficient headroom,” said Liam Li, analyst at Moody’s Ratings.
“We expect its leverage to remain within our tolerance levels as earnings continue to be supported by favourable lease structures with annual rent escalations. Moreover, balance sheet gearing reduced to 30.1%, registering in the middle of the REIT’s 25%-35% target range, as debt reduction following asset sales alleviated pressure on gearing levels despite asset value declines.”
Moody’s reaffirmed CLW’s Baa1 investment grade rating in July 2024.
“Charter Hall Long WALE REIT’s (CLW) results for the full year ended June 2024 are in line with our expectations,” added Li.
“Nevertheless, its interest coverage has weakened amid high interest rates and is outside of our tolerance level for the rating. However, we expect this to gradually improve over the next 12-18 months, supported by lower interest costs following debt reduction and rental growth. CLW has also partially tempered the impact of higher interest rates with around 72% of look-through debt hedged.”
The REIT has a weighted average debt maturity of 4.1 years with staggered maturities over a six-year period from FY27 to FY32, with look-through drawn debt 72% hedged with a weighted average hedge maturity of 2.0 years.
CLW has $344 million of cash and undrawn debt.
CLW has also announced its intention to conduct an on-market buy-back of securities in CLW for up to $50 million.
CLW has provided FY25 operating earnings per security guidance of 25.0 cents and distributions per security guidance of 25.0 cents, representing a 7.2% distribution yield.
