Index boost for Charter Hall-run fund
The $2.3 billion Charter Hall Long WALE REIT should firm as an investment target after its growing scale made it eligible for inclusion in a major global real estate index.
The Charter Hall-managed fund, which runs a near $3 billion portfolio of long-leased commercial property assets, was admitted to the EPRA NAREIT Global Real Estate Index after the property stocks index was rebalanced on December 5. The inclusion takes effect on December 20.
Inclusion in major market indices typically sparks increased investment from index funds and other institutional investors.
“Should Charter Hall Long Wale REIT be admitted we estimate it will result in $US31m ($45m) of buying from index funds equivalent to 5.5 days trading volume, and this excludes long only funds,” wrote JPMorgan analysts Ben Brayshaw, Krzysztof Kaczmarek and Richard Jones in a client note last month, anticipating the index inclusion.
The Charter Hall-run fund, known by its ticker as CLW, was floated three years ago and has grown steadily since, led by by fund manager Avi Anger.
Chairman Peeyush Gupta noted the series of equity raisings which have allowed the property trust to expand and diversify its portfolio during his address to the inaugural annual shareholder meeting last week.
The fund’s portfolio comprises 158 properties, compared to 66 at the time of its IPO in November 2016, and the portfolio value has risen from $1.25 billion three years ago to$2.88 billion.
“These equity raises have also had the effect of increasing CLW’s market capitalisation and seen CLW included in the ASX200 index,” Mr Gupta said.
“This has brought benefits of greater liquidity for investors and increased exposure through additional analyst coverage, leading to a more informed market and ultimately a better cost of capital for CLW unitholders.”
The portfolio’s weighted average lease expiry, or WALE, has extended from 12.5 years at the time of IPO to 13.3 years.
The JPMorgan analysts seized on those long-dated leases, noting the “thematic shift” from investors towards such property in the local market.
“We expect transaction activity for long WALE assets in Australia to reflect strong pricing in the near term,” they wrote.
“We believe return spreads for long WALE assets are attractive at current levels, should the yield curve remain supportive.”
