Charter Hall Retail Shares Uplifted After Announcing The Divestment of Two Lower Growth Assets

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Charter Hall Retail REIT

On 6 November 2018, Charter Hall Retail REIT (ASX: CQR) announced the divestment of two of its assets for a total consideration of $76.1 million. Coomera Square, QLD and a freestanding Woolworths asset at Young, NSW are the two low growth assets in which the REIT has contracted to divest. Further, the assets were disposed at a small discount to book value with settlement forecast to occur in December 2018 for Coomera Square and February 2019 for the Young assets.  Following the release of this news, the share price of the company uplifted by 1.31 percent as on 6 November 2018.

Both the assets were sold at a small discount to book value, and the divestments are consistent with the REIT’s strategy to divest smaller assets and recycle capital into centers which are the dominant convenience-based offers in their respective catchments. 

During FY 2018, REIT settled 15 divestments of smaller assets with a total value of $309 million, averaging $23 million per asset. Since their initial acquisition, these assets delivered double-digit property returns to the Fund, with some of them having been held for over 22 years. The company also reduced its exposure to small assets in regional locations where there was limited opportunity to deliver future growth and reinvested into convenience and convenience-plus assets that dominate in the strong population growth catchments. At the end of FY 2018, REIT was having 59 convenience and convenience-plus assets, including the acquisition of Gateway Plaza in Victoria. During FY 2018, the company invested in three high-quality assets totaling $274 million and all three centers are the dominant convenience-based offers in their respective catchments and are positioned to deliver sustainable growth.

In FY18, REIT delivered operating earnings per unit growth of 0.4% to 30.51 cents which were in line with the market guidance and REIT’s distributions per unit was 28.20 cents which were an increase from 28.10 cents in FY 2017. The net tangible assets per security increased by 2.2% to $4.22 in FY 2018 due to the increase in rental revenue and tightening cap rates. As per the Charter Hall Retail REIT’s FY 2019 guidance, the operating earnings are expected to grow by 2.0% per security over FY 2018, and the distribution payout range is likely to be between 90% to 95% of operating earnings.

In the last six months, the share price of the company increased by 3.70 percent as at 5 November 2018, traded at a PE level of 11.620. CQR’s shares traded at $4.225 with a market capitalization of circa $1.69 billion as on 6 November 2018 (AEST 02:01 PM).


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