Charter Hall Long WALE REIT Faces Cap Rate Expansion but Maintains Earnings Guidance
Charter Hall Long WALE REIT reported stable FY25 financials with a $5.5 billion portfolio and 99.9% occupancy, maintaining strong income security. The REIT projects modest growth in FY26 with a 6.1% distribution yield.
- FY25 operating EPS and DPS steady at 25.0 cents per security
- Portfolio valued at $5.5 billion with 99.9% occupancy and 9.3-year WALE
- 3.0% like-for-like net property income growth despite cap rate expansion
- $356.7 million in divestments and $134.7 million in strategic acquisitions
- FY26 guidance targets 25.5 cents EPS/DPS, reflecting 2% growth and 6.1% yield
Stable Financial Performance Amid Market Shifts
Charter Hall Long WALE REIT (ASX – CLW) has reported its full year results for FY25, delivering operating earnings per security (EPS) and distributions per security (DPS) of 25.0 cents, in line with prior guidance. The REIT’s portfolio, valued at approximately $5.5 billion, maintained an impressive 99.9% occupancy rate, underpinned by long-term leases to blue-chip tenants and a weighted average lease expiry (WALE) of 9.3 years. This stability comes despite ongoing market challenges, including cap rate expansion in some sectors.
Portfolio Growth and Income Security
Like-for-like net property income grew by 3.0% during FY25, supported by 54% of leases structured as triple net (NNN), where tenants bear property outgoings and capital expenditure. The portfolio’s diversification across sectors such as long WALE retail, industrial and logistics, data centres, social infrastructure, and office assets has helped mitigate risks. Notably, sectors like retail and industrial saw valuation increases of 35% and 31% respectively since June 2020, offsetting a 16% decline in office valuations.
Active Capital Management and Portfolio Curation
Capital management remains a priority, with $715 million in new interest rate hedging completed and $310 million of debt refinanced and extended, preserving the REIT’s Moody’s Baa1 stable credit rating. The REIT also executed $356.7 million in divestments, including assets in agri-logistics and convenience retail, while investing $134.7 million in strategic acquisitions focused on government-leased social infrastructure properties such as the Department of Defence Campbell Park facility and the Australian Border Force headquarters. These moves reflect a deliberate strategy to enhance portfolio quality and income resilience.
Sustainability and ESG Leadership
Charter Hall Long WALE REIT continues to advance its sustainability agenda, maintaining net zero Scope 1 and 2 emissions by 2025 through renewable energy initiatives and nature-based offsets. The REIT scored 78 points in the 2024 GRESB assessment, ranking first among Australian peers and demonstrating strong environmental, social, and governance (ESG) performance. Investments in solar energy and community partnerships further underscore its commitment to responsible asset management.
Outlook and FY26 Guidance
Looking ahead, CLW projects FY26 operating EPS and DPS of 25.5 cents per security, representing a modest 2% growth and a distribution yield of 6.1% based on the current security price. The REIT’s strategy remains focused on delivering stable income and capital growth through a diversified portfolio leased to secure tenants, with active asset recycling and capital structure optimisation expected to support this trajectory.
Bottom Line?
With a resilient portfolio and disciplined capital management, Charter Hall Long WALE REIT is positioned for steady income growth amid evolving market conditions.
Questions in the middle?
- How will ongoing cap rate pressures affect future portfolio valuations and income?
- What impact will rising interest rates have on CLW’s cost of debt and distribution sustainability?
- Can the REIT continue to source accretive acquisitions in government-leased social infrastructure?
