CLW - Charter Hall Long WALE REIT

Appreciate your efforts VC.
$5.89 NTA per security, and 46% of rent reviews CPI linked, makes good reading

REIT's have so far been good to me, as of COB today, CLW is at $4.31 and was below $3.90 a month ago.
Hav ing owned bricks and mortar commercial property myself, these are no brainers.
Just might cut my losses on some tech ETF's and jump boat.

Gretsch said:

REIT's have so far been good to me, as of COB today, CLW is at $4.31 and was below $3.90 a month ago.
Hav ing owned bricks and mortar commercial property myself, these are no brainers.
Just might cut my losses on some tech ETF's and jump boat.

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have had more good REITs ( including CLW ) than bad ( like APZ and others )

currently i use REITs ( most of them ) as bond substitutes ( that is provide relatively stable income )

HOWEVER rising interest rates and a possible tightening of lending , has me watching to leverage percentage of debt held

could either be a massacre , or a windfall for the bold and lucky

divs4ever said:

currently i use REITs ( most of them ) as bond substitutes ( that is provide relatively stable income )

HOWEVER rising interest rates and a possible tightening of lending , has me watching to leverage percentage of debt held

could either be a massacre , or a windfall for the bold and lucky

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Agree, I'm more comfortable holding REITs instead of bonds myself.
Rising interest rates are front of mind right now and wondering how much lower will/can REITs get?

Gretsch said:

Agree, I'm more comfortable holding REITs instead of bonds myself.
Rising interest rates are front of mind right now and wondering how much lower will/can REITs get?

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i have been CAREFULLY averaging down on a few ( REITs )

but most REITs use leverage , property values and credit availability that can be an explosive mix ( add on fund managers who may use leverage to increase returns , but risk forced selling )

well things MIGHT be actually different this time ( in a bad way ) seems everything is possible , so you must include multiple currency collapses into the risk guesstimates

so will REITs ( in the majority ) be more resilient than sovereign bonds and shares ?

i hold a fair amount of shares and REITs ( and a some exposure to corporate debt NOT sovereign debt )

but in reality all currencies could go to zero ( nuking all financial instruments ) and leaving only tangible commodities

Charter Hall Long WALE REIT (ASX:CLW) (the REIT) today announces its half year results for the period ending 31 December 2023 (1H FY24).

Key financial and operational highlights for the period are: Financial highlights:
• Operating earnings of $94.0 million, or 13.0 cents per security (cps)
• Distributions of 13.0cps • Net tangible assets (NTA) of $5.14 per security
• Statutory earnings of ($258.4) million
• 4.3% weighted average rent review
• Portfolio weighted average lease expiry (WALE) of 10.8 years
• Portfolio weighted average cap rate of 5.08% Operating highlights:
• Successful portfolio recycling with $85.1 million divestment of three industrial assets (Australia Post, Kingsgrove NSW, Coates Hire, Kingston QLD and Veolia, Campbellfield Vic).
• $36.5 million1 office divestment of 40 Tank Street, Brisbane QLD
• $23.0 million sale of a Convenience retail centre anchored by Ampol at Redbank Plains, QLD
• In addition to the $145.82 million in completed or unconditional disposals, CLW has in excess of $500 million of divestments in due diligence
• 53% triple net (NNN) leases across the portfolio, where the tenants are responsible for all outgoings, maintenance and capital expenditure
• 52% of leases with inflation-linked annual reviews with a 5.4% weighted average increase in FY24 3

1 Sale price of $36.5 million represents CLW’s 50% interest. Total asset sale price of $73 million.
2 Includes two convenience retail properties sold by bp Australia at or above book value, for a combined value of $1.3 million (CLW’s interest).
3 Reflects the June 2023 CPI of 6.0%, September 2023 CPI of 5.4% and December 2023 CPI of 4.1%.

The majority of the REIT’s CPI-linked leases are linked to September annual CPI.

• 48% of leases with annual fixed reviews with an average fixed increase of 3.1% Avi Anger, Charter Hall Long WALE REIT Fund Manager commented: “CLW’s portfolio continues to demonstrate its resilience with strong income growth driven by 4.3% weighted average rent reviews across the portfolio.
The attractiveness of our assets has been demonstrated with the $145.8 million of completed or unconditional disposals achieved during the period.
Further, we have in excess of $500 million of assets currently in due diligence to divest.
We remain confident that CLW continues to be well placed to deliver strong rental growth, while the attractive nature of our assets provides opportunities to selectively curate the portfolio and build further balance sheet capacity.” Portfolio update Portfolio curation remains a key strength of the Charter Hall platform.

During 1H FY24, CLW executed $145.8 million of completed or unconditional divestments.
Divestment pricing was in-line with December 2023 book values.
• Divestments:
– $39.3 million divestment of Australia Post, Kingsgrove, NSW with 2.7 years lease term remaining
– $38.7 million divestment of Coates Hire, Kingston, QLD with 9 years lease term remaining
– $7.1 million divestment of Veolia Campbellfield, Vic with a 1 year lease term remaining
– $36.5 million divestment of 40 Tank Street, Brisbane, QLD with 2.7 years WALE remaining
– $23 million divestment of Ampol, Redbank Plains, QLD convenience retail centre with 6.2 years WALE remaining Portfolio valuations CLW had 94%1 of the portfolio by gross asset value independently valued as at 31 December 2023 with the balance of the portfolio having been independently valued at 30 June 2023.
The valuations resulted in a $306 million, or 4.5% net decrease from prior book values.
The overall portfolio value decreased from $6,8542 billion to $6,508 billion and the portfolio average cap rate expanded 31bps from 4.77% to 5.08%.
At the end of the period, the REIT’s diversified portfolio is 99.9% occupied and comprised 546 properties with a long WALE of 10.8 years. Capital position
During 1H FY24, CLW refinanced and extended $320 million of balance sheet and look-through debt facilities.
Post balance date, CLW has refinanced and extended a further $500 million of balance sheet facilities.
In September 2023, Moody’s reaffirmed CLW’s Baa1 investment grade rating.
CLW has a weighted average debt maturity of 4.7 years with staggered maturities over a six-year period from FY27 to FY32.
Including the proceeds from unconditional or settled disposals post balance date, CLW’s look-through drawn debt is 82% hedged with a weighted average hedge maturity of 2.1 years.
Balance sheet gearing is 34.5% and look-through gearing is 41.2%.
CLW has $372 million of cash and undrawn debt.
1 Excluding assets held for sale as at 31 December 2023.
2 Reflects book values as at 30 June 2023, adjusted for all capital expenditure and additions in the six-month period to 31 December 2023.
FY24 Guidance Based on information currently available and barring any unforeseen events, CLW reconfirms FY24 Operating EPS guidance of 26.0 cents and distribution per security guidance of 26.0 cents.
Based upon yesterday’s closing price, this represents a 6.9% distribution yield1

. Announcement Authorised by the Board

i hold CLW

( i tend to invest in REITs as a bond proxy )

Thanks for that divs4ever. I hold also

Logique2 said:

Thanks for that divs4ever. I hold also

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but i like to spread the REIT portfolio across several stocks/groups it can get tricky balancing out all that debt and assets

Gretsch said:

REIT's have so far been good to me, as of COB today, CLW is at $4.31 and was below $3.90 a month ago.
Hav ing owned bricks and mortar commercial property myself, these are no brainers....Just might cut my losses on some tech ETF's and jump boat.

Click to expand...

liferaft??


08 February 2024

Charter Hall Long WALE REIT faces asset sales​

By Glenn Dyer |

In August, Charter Hall Long WALE REIT indicated its intention to sell assets to manage gearing after suffering significant write-downs and asset devaluations, leading to a loss of $189 million for the 2022-23 financial year. The driver behind this loss was a $362.7 million downward revaluation of its $6.8 billion portfolio, including office buildings, warehouses, social infrastructure, agricultural assets, and retail outlets like pubs and petrol stations, revealed during the annual results last August.

During the recent interim results for the 2023-24 financial year, the company reported another loss and emphasized the need for further asset sales, aiming to offload over $500 million worth of commercial property to reduce its debt burden and appease its lenders.

Although the trust has already sold assets worth $145.82 million, there's still nearly $400 million to go to achieve a sustainable level of gearing. Additionally, property write-downs totaling over $306 million, coupled with a $42 million loss on financial derivatives, resulted in a statutory loss of $258.4 million for the 2024 interim earnings period.

Distribution was trimmed to 13 cents a security, reflecting a 7.1% dip in net earnings to just over $93 million. Combined losses for the 18 months to December amounted to $457 million, primarily due to significant write-downs totaling $668 million.

Despite these challenges, the trust maintained its guidance of a 7.1% decrease in earnings and distribution of 26 cents a security for the year ending June. This is a decrease from the distribution and operating earnings of 28 cents a security in 2022-23.

The trust's net tangible assets stood at $5.14 a security at the end of December, down from $5.63 at the end of June, with securities trading around 3% higher at $3.87, representing nearly a 25% discount to the NTA figure.

i hold CLW

am not willing to add more above $3.05 , there are likely more devaluations to come , and contagion from other REITs facing the same challenges

Dona Ferentes said:

liferaft??


08 February 2024

Charter Hall Long WALE REIT faces asset sales​

By Glenn Dyer |

In August, Charter Hall Long WALE REIT indicated its intention to sell assets to manage gearing after suffering significant write-downs and asset devaluations, leading to a loss of $189 million for the 2022-23 financial year. The driver behind this loss was a $362.7 million downward revaluation of its $6.8 billion portfolio, including office buildings, warehouses, social infrastructure, agricultural assets, and retail outlets like pubs and petrol stations, revealed during the annual results last August.

During the recent interim results for the 2023-24 financial year, the company reported another loss and emphasized the need for further asset sales, aiming to offload over $500 million worth of commercial property to reduce its debt burden and appease its lenders.

Although the trust has already sold assets worth $145.82 million, there's still nearly $400 million to go to achieve a sustainable level of gearing. Additionally, property write-downs totaling over $306 million, coupled with a $42 million loss on financial derivatives, resulted in a statutory loss of $258.4 million for the 2024 interim earnings period.

Distribution was trimmed to 13 cents a security, reflecting a 7.1% dip in net earnings to just over $93 million. Combined losses for the 18 months to December amounted to $457 million, primarily due to significant write-downs totaling $668 million.

Despite these challenges, the trust maintained its guidance of a 7.1% decrease in earnings and distribution of 26 cents a security for the year ending June. This is a decrease from the distribution and operating earnings of 28 cents a security in 2022-23.

The trust's net tangible assets stood at $5.14 a security at the end of December, down from $5.63 at the end of June, with securities trading around 3% higher at $3.87, representing nearly a 25% discount to the NTA figure.

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Never owned CLW, it has been attractive but never found it at a good entry point and now it’s too highly leveraged for my liking.

Gretsch said:

Never owned CLW, it has been attractive but never found it at a good entry point and now it’s too highly leveraged for my liking.

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What LVR do you consider to highly leveraged?
What would you prefer their LVR to be?

Gretsch said:

Never owned CLW, it has been attractive but never found it at a good entry point and now it’s too highly leveraged for my liking.

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sadly a feature of many REITs and that leverage could be problematic later

i also notice some REITs are declaring they have hedging on their future debt obligations , now i assumed ( dangerous i know ) that hedging is widespread in higher geared REITs , but now open declarations ?

i would think CLW will offload some assets at an appropriate offer , but that could take time

Value Collector said:

What LVR do you consider to highly leveraged?
What would you prefer their LVR to be?

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me ( not @Gretsch ) i baulk at 40% ( except in exceptional circumstances )

and strongly prefer much closer to 20% than 30%

but of course with REITs that is a shifting playing field as they often churn assets meaning LVR can really move around

divs4ever said:

i hold CLW

am not willing to add more above $3.05 , there are likely more devaluations to come , and contagion from other REITs facing the same challenges

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Valuations are not to important in the short term, they move around with interest rates, I thing I like love about CLW is the fantastic property portfolio, and the steady rental increases built in to their leases.

All thats happened is interest rates have come up fairly quicking, obviously faster than the rental increases have come in which has caused their dividend to drop from 7 cents to 6.5 cents, and the valuation of the properties to come down reflecting that.

But, if you stand back and look at the big picture, The rental increases will keep coming year after year, (look at the last few pages of their half year report presentation for a break down), but interest rates can't keep rising. So it will all balance out and the income will be great, and the valuations will rise over time with inflation once this temporary re adjustment of interest rates is done.

I hold, and will probably be holding in 20 years time, its a great little income generator in my portfolio.

Value Collector said:

Valuations are not to important in the short term, they move around with interest rates, I thing I like love about CLW is the fantastic property portfolio, and the steady rental increases built in to their leases.

All thats happened is interest rates have come up fairly quicking, obviously faster than the rental increases have come in which has caused their dividend to drop from 7 cents to 6.5 cents, and the valuation of the properties to come down reflecting that.

But, if you stand back and look at the big picture, The rental increases will keep coming year after year, (look at the last few pages of their half year report presentation for a break down), but interest rates can't keep rising. So it will all balance out and the income will be great, and the valuations will rise over time with inflation once this temporary re adjustment of interest rates is done.

I hold, and will probably be holding in 20 years time, its a great little income generator in my portfolio.

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yes , i am mostly about returns on investment ( rather than capital gains ) after all i consider them a bond proxy and a bond if held to full term ( if it gets there ) only returns your investment plus some interest payments on the way

and if your have floating-rate bonds those payments can be just as lumpy as any REIT

am not so sure i will be around in 20 years , but a fairly regular income source 'for life' looks OK for me

but have shares and other assets as well to help smooth the ride

divs4ever said:

yes , i am mostly about returns on investment ( rather than capital gains ) after all i consider them a bond proxy and a bond if held to full term ( if it gets there ) only returns your investment plus some interest payments on the way

and if your have floating-rate bonds those payments can be just as lumpy as any REIT

am not so sure i will be around in 20 years , but a fairly regular income source 'for life' looks OK for me

but have shares and other assets as well to help smooth the ride

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I like to think of them as a - “Better than Bond Proxy” . In that your capital and ”interest” should be fairly protected from inflation over the long term, offcourse as you pointed out long term bonds can have their prices rise and fall, but over time the inflation and population Growth will have a much larger effect than interest rates because interest rates rise and fall in a cycle, but inflation longterm only goes one way.

In a sense I am saying ignore the waves but watch the Tide.

i have a selection of REITs ( including CLW ) trying to enter at low-tide in various niches

for example i grabbed some MGR in 2011 @ $1.10 and got some capital gains and useful returns

some of the others are less impressive , but that is the property game , who would have guessed office space would be an albatross prior to 2020 ( i was lucky and saw demand for industrial sheds and focused there dodging heavy office exposure )

divs4ever said:

i have a selection of REITs ( including CLW ) trying to enter at low-tide in various niches

for example i grabbed some MGR in 2011 @ $1.10 and got some capital gains and useful returns

some of the others are less impressive , but that is the property game , who would have guessed office space would be an albatross prior to 2020 ( i was lucky and saw demand for industrial sheds and focused there dodging heavy office exposure )

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i agree, I don’t want to be to heavy in office property, it’s good to have some good high quality offices in the portfolio.

crack open that CLW half year results presentation again and have a look at the back where they break down their portfolio by type and give the property valuations, cap rates, and WARR(weighted average rent reviews), it’s really interesting to compare, the office property has higher cap rates and larger rental increases than the other sectors, so it’s good to have some in there.

check out the Arnotts factory they own, a 28year lease with CPI + 0.5% rental increase every year, that’s a lot better than a bond, you can’t tell me 28 years that property won’t be worth more than it is today, and per year income increases compounds too.

indeed i was happy to see that , and that is why i still have a current 'top up ' price for them

and market sentiment might deliver that price for me

( several rivals are currently 'wait and watch ' )

( and why i avoided CHC )

but where is 'the future ' will Australia veer back towards 'self-sufficiency ' ( more local manufacturing ) will Australia become a collection of crime zones ( like the one i recently moved from ) where retail is plagued with various types of criminal activity and face many extra challenges , will housing affordability force the population into down-sizing/house-sharing/unit living