About 51 per cent of the fund’s income comes from its major tenants.

Retailers reopen but shopping centre landlord seeks $300m capital boost

Simon Johanson and Carolyn Cummins|Apr 28, 2020

Retailers are reopening their doors as Australia slowly starts to lift lockdown restrictions but shopping centre landlords, uncertain about the long-term economic impact, are still tapping investors for more capital.

Charter Hall Retail REIT (CQR), a fund manager that oversees a $3.2 billion shopping centre and convenience portfolio, is the latest to initiate an equity raising, announcing on Monday it is seeking $300 million just two months after tapping investors for a $100 million capital injection.

The trust manages and owns a string of regional and suburban properties leased to Coles, Woolworths, BP, Wesfarmers and Aldi. About 51 per cent of the fund’s income comes from its major tenants.

“While the duration and economic impacts of the COVID-19 pandemic remain uncertain, the REIT’s operations are resilient,” the trust said in a statement to the ASX on Monday.

Like its retail counterpart Vicinity Centres which on Monday reopened its upmarket Emporium Melbourne shopping centre, Charter Hall Retail said many tenants that had voluntarily closed because of the pandemic were now reopening. At least 87 per cent of tenants in the group’s portfolio are open and trading, it said.

However, in a bid to strengthen its balance sheet and give it flexibility to manage the economic impact of the pandemic, the real estate trust has tapped the market for $275 million through a fully underwritten institutional placement and a further $25 million in a unit purchase plan to eligible unitholders.

The institutional placement represents about 20 per cent of the group’s units on issue prior to the equity raising and will be offered at a 7.9 per cent discount to CQR’s last close price on Friday of $3.15. The new units issued will rank equally with existing ones and be entitled to the distribution for the six months ending June 30, it said.

Macquarie Bank analysts said they remained attracted to CQR’s defensive income. The analysts labelled the stock an “outperform” after having already priced in a 10 per cent equity market discount on their valuation to adjust for the risk of an equity raising.

The raising comes after the fund tapped investors for $100 million in fresh equity at $4.81 a unit on February 20.

It also follows pub landlord ALE Property, which saw most of its venues abruptly shut in March, refinancing its debt with a new $250 million facility that will roll up all its maturing debt from the 2021 financial year.