• Portfolio Value: $5.5 billion diversified real estate portfolio.
• Occupancy Level: 99.8% occupancy.
• Weighted Average Lease Expiry (WALE): 9.7 years.
• Operating Earnings: $0.1205 per security for the half year.
• Net Tangible Assets (NTA): $4.62 per security as of December 31, 2024.
• Like-for-Like Net Property Income Growth: 3.5% over the prior corresponding period.
• Triple Net Lease Income: 53% of income from triple net lease properties.
• Asset Sales Program: Completed $300 million of contracted divestments.
• Buyback Program: Completed $50 million buyback of CLW securities.
• Balance Sheet Gearing: 31.8% after divestment program.
• Credit Rating: Moody's BAA1 investment grade.
• Reduction in Operating Expenses: 17.5% reduction.
• Reduction in Finance Costs: 15.6% reduction.
• Weighted Average Cost of Debt: Increased from 4% to 4.1%.
• Net Property Divestments: $289 million completed.
• Debt Refinancing: $310 million refinanced, extending term to FY30.
• Cash and Undrawn Debt Capacity: $266 million as of December 31, 2024.
• Portfolio Cap Rate: 5.4% as of December 31, 2024.
• Distribution Yield: 6.4% based on closing price.

• Warning! GuruFocus has detected 7 Warning Signs with ASX:CLW.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Charter Hall Long WALE REIT (ASX:CLW) has a diversified real estate portfolio valued at $5.5 billion, with a high occupancy rate of 99.8% and a weighted average lease term of 9.7 years.
• The REIT achieved a 3.5% like-for-like net property income growth, benefiting from 54% of its income being CPI-linked.
• The portfolio is secured by long leases to blue-chip tenants, with 99% of tenants being government, ASX-listed, multinational, or national businesses.
• The REIT completed a $50 million buyback of securities, demonstrating strong capital management and maintaining a gearing ratio within the target range.
• Moody's reaffirmed the REIT's BAA1 investment-grade credit rating, indicating financial stability and strong creditworthiness.

Negative Points

• The REIT's net tangible assets per security remained relatively stable, with minor reductions due to property revaluations and interest rate swap movements.
• There was a 17.5% reduction in operating expenses and a 15.6% reduction in finance costs, primarily due to divestment activities, which may impact future income streams.
• The REIT's weighted average cost of debt increased slightly from 4% to 4.1%, indicating rising financing costs.
• The REIT completed $289 million of net property divestments, which could potentially limit future growth opportunities.
• The REIT's portfolio cap rate has increased by 100 basis points over the past 2.5 years, reflecting potential challenges in maintaining property valuations.

Q & A Highlights

Q: Regarding the buyback completed in the first half, is there a weaker moving part since guidance remains unchanged? A: No, the guidance includes the impact of the buyback, which was done at a 6.4% yield. It has an immaterial impact, so the $0.25 guidance remains unchanged. The full impact will be seen in FY26. - Scott Martin, Head of Finance

Q: Have there been any changes to debt covenants, and where do you stand against them? A: No changes have been made to the covenants. We continue to monitor balance sheet and look-through gearing metrics, which have materially reduced due to the sales program. Valuations have remained stable, so there is no material change to covenant metrics since June. - Scott Martin, Head of Finance

Q: Did you consider extending the buyback given the 15% discount to NTA? A: We completed the $50 million buyback as announced, using excess proceeds from our divestment program. There is no intention to extend it further at this stage, as it impacts gearing. - Avi Anger, Fund Manager

Q: Can you provide an indication of the costs for the Perth airport shed expansion? A: The cost for our 49.9% share is just under $30 million. We are not disclosing the yield on cost, but it is well above our cost of debt, making it a positive impact for CLW. - Avi Anger, Fund Manager

Q: What are the costs assumed in guidance for this year? A: We have rolled three-quarters of our floating rate debt exposure at around 4.4%. The remaining quarter rolls in March, and we do not forecast a material reduction in that Q4 debt role. - Scott Martin, Head of Finance

Q: Can you update on the A LE portfolio underrenting situation? A: At the time of the A LE transaction in late 2021, rents were about 37% below market levels. We haven't updated since, but they are at least that today. The market rent review is in 2028, and we will realize it then unless brought forward. - Avi Anger, Fund Manager

Q: Has the Coles facility extension in WA been reflected in the 31 December carrying value? A: No, it will be reflected upon completion as we spend the money, adding to the cost base of the asset. It will be valued on completion of the works. - Avi Anger, Fund Manager

Q: Are you considering investing in data centers going forward? A: We will consider data center assets if presented. The reference to data centers reflects the equipment in our exchange properties and Telstra's edge computing rollout, which may utilize our properties. - Avi Anger, Fund Manager

For the complete transcript of the earnings call, please refer to the full earnings call transcript.