Share Entitlement Offer By Charter Hall Long Wale

CHARTER HALL LONG WALE REIT (ASX: CLW) is a Real Estate Investment Trust. It follows a strategy of investing in high quality Australian real estate assets. The company leases these assets mainly to the corporate and government tenants for long-term.

The company recently planned of raising approximately $125 million through fully underwritten 1 for 8.1 accelerated and non-transferable shares. It launched an entitlement offer of new securities and has invited the shareholders to participate in it at an issue price of $4.05 per new share. Â

The shares issued however are fully underwritten accelerated non-transferrable. Both the institution and retailers will be eligible for the offer. The new shares will be issued on 19 December 2018.

The entitlement proceeds will be used to partially fund the acquisition of 100% interest in a portfolio. The portfolio will comprise of Agri-logistics properties with a worth of $207 million. The several acquired companies include hatcheries, feed-mills and breeder farms. The total worth of the acquisition reflects a weighted average capitalisation rate of 7.35%.

The highlights of the acquisition include:

  • 100% leased to a subsidiary of Inghams Group Ltd. The Inghams group is listed in S&P and ASX 200 and it is the largest poultry producer in Australia, with a revenue of over $2 billion in FY18.
  • Strategic assets of Inghams’ Australian business are mostly its long-term supply chain infrastructure for raw materials.
  • Large land holdings will give Inghams more opportunity to expand production capacity on current sites. They can meet the meet the growing demand for poultry products in Australia on account of increased production capacity.
  • A triple net lease structure with the remaining lease term of 15.8 years is followed for the acquisitions.
  • The acquired portfolio is diversified across all Australian states. It also has an exposure to the agri-logistics sector which has a robust industry fundamental.

The retail entitlement offer is about to raise nearly $44 million. The retail securityholders are entitled to subscribe for 1 new security for every 8.1 securities, however these will be based on the holding as on the record date.

Financial impact of acquisition and the entitlement offer: CLW forecasted its FY19 operating EPS guidance range to be within 26.8 and 26.9 cents per security which is nearly an increase of 1.3% from the previous stated guidance. Following the acquisition and the entitlement offer which includes the impact of the REIT’s October 2018 placement and security purchase plan, post balance date transactions and the December 2018 revaluations, the REIT’s pro-forma June 2018 as stated by the company in the offer document are:

  • balance sheet gearing is forecasted to be 31.9%, within CLW’s target range of 25 – 35%
  • the gearing ratio is forecast to be 37.9%

The company’s stock has experienced a downward trend in the last 3 months, as demonstrated by fall of 0.44%. Post the announcement, the shares closed almost a percent high, at a price of $ 4.29.


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