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Charter Hall Retail REIT (ASX: CQR) is poised to bank $225.5 million from the sale of two shopping centres in Victoria and South Australia after receiving unsolicited off-market offers for the assets.
These two sales have so far this financial year already exceeded the $203 million of divestments in total in FY23, which included the Coles Distribution Centre and Brickworks Marketplace in Adelaide, as well as Allenstown Square in Queensland
Charter Hall Retail, an investor in convenience retail properties, has secured a $134.5 million deal for Rosebud Plaza on the Mornington Peninsula in Victoria and a $91 million deal for Southgate Square at Morphett Vale in South Australia.
Charter Hall Retail has confirmed to Business News Australia that the deals for each of the centres have been secured by separate buyers, while the prices achieved are in line with book valuations at the end of June this year.
“These sales demonstrate CQR’s on-going active asset management and focus on improving portfolio quality while maintaining balance sheet strength,” says Charter Hall Retail CEO Ben Ellis.
“The sale proceeds of $225.5 million less transaction costs, will strengthen the balance sheet optionality that CQR has traditionally had through the ownership of liquid convenience retail assets.”
The Southgate deal is poised to settle in February 2024 and Rosebud in June 2024, with the proceeds expected to cut Charter Hall Retail’s pro-forma balance sheet gearing from 29 per cent to about 25 per cent.
Over the past year, Charter Hall Retail has realigned its portfolio with an increased exposure to service stations which has helped it expand its long WALE (weighted average lease expiry) convenience retail portfolio.
In August last year, the trust announced the $107 million acquisition of 18 Gull service stations in New Zealand and a 5 per cent interest in a Charter Hall Group (ASX: CHC) partnership that owns a portfolio of 204 Ampol service stations.
Earlier this year, Charter Hall Retail also invested in a convenience long WALE retail partnership with superannuation fund Hostplus through the $61 million acquisition of an 18 per cent interest in the Long WALE Investment Partnership 2. The latter is a Charter Hall partnership that comprises 11 Endeavour Group-leased retail assets.
Charter Hall Retail’s long WALE convenience retail assets now represent 25 per cent of the total portfolio by value and 19.5 per cent of total portfolio income.
Ellis revealed at the Charter Hall Retail AGM last month that these assets are ‘all triple net leased, meaning they're free of any capital expenditure and provide a true AFFO (adjusted funds from operations) yield’ for investors.
Charter Hall Retail today has confirmed that ‘barring unforeseen events’ it expects FY24 operating earnings to be about 27.4c per unit. This compares with 28.71c per unit in FY23.
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