ASX listed Real Estate Investment Trust (REIT), Charter Hall Education Trust (ASX: CQE) has made an announcement that it is going to acquire 13 early learning centres for a total consideration of $75.5 million which will be funded through a fully underwritten $100 Mn institutional placement of fully paid units in CQE. Alongside the Acquisitions and Placement, the Trust has also announced about various capital management initiatives to position the Trust for the future.
Acquisition Portfolio comprises a 100% freehold interest in 13 early learning properties which includes 2 completed centres, 5 centres which are going to complete between April 2019 and July 2019 and 6 fund-through development centres which will complete between November 2019 and March 2020.
To acquire these learning centres, the Trust is going pay a total consideration of $75.5 million which reflects a weighted average initial yield of 6.5%.
In an announcement made on 26 March 2019, the Trust has announced that it is going to undertake a fully underwritten institutional placement to raise approximately $100 million to fund the Acquisitions and associated transaction costs as well as provide balance sheet headroom to finance CQE's current pipeline. The Placement is fully underwritten by J.P. Morgan Securities Australia Limited.
The Placement will be issued at a fixed price of $3.35 per Unit which represents a 5.1% discount to the distribution adjusted last close price of $3.53 on 25 March 2019 and 4.0% discount to the distribution adjusted 5-day VWAP of $3.49 on 25 March 2019.
Units issued under the Placement will rank equally with existing CQE Units and these new Units will not be entitled to the CQE’s distribution for the three months ending 31 March 2019. New Units issued under the Placement will be entitled to the distribution for the three months ending 30 June 2019.
Alongside the Acquisitions and Placement, the Trust is also increasing its debt facilities by $50 million to provide increased liquidity in order to fund its current pipeline while remaining below target Gearing range of 30% to 40%.
The Trust is also increasing and extending the Trust’s hedging positions to take advantage of a more favourable interest rate environment.
In today’s announcement, the Trust has confirmed that it is maintaining its FY19 forecast distribution guidance of 16.0 cents per Unit. The company has also provided its indicative FY20 distribution guidance of 16.5 – 16.6 cents per Unit implying a distribution growth of 3.5 – 4.0%.
Following the Acquisitions, Placement and capital management initiatives, the Trust's pro-forma December 2018 balance sheet gearing is forecast to be 27.0%.
CQE’s shares were placed in a trading halt today at the request of CQE to enable an announcement to be made to the market of a significant transaction, involving material acquisitions funded by an underwritten institutional placement. In the past six months, the share price of the company increased by 25.70% as on 25 March 2019 and is trading at a PE ratio 10.160x. CQE’s shares last traded at $3.570 with a market capitalization of circa $923.07 million as on 26 March 2019 (AEST 1:49 PM).
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