Charter Hall announced Wednesday that it would acquire a 49% interest in a portfolio of 70 convenience retail properties, currently tenanted by BP in New Zealand.
The portfolio, which includes most of BP’s New Zealand convenience retail properties, has been acquired in a sale and leaseback deal. The asset portfolio will have a 20-year WALE (weighted average lease to expiry) at acquisition, with the initial lease terms of the properties in the portfolio ranging from 18 to 22 years. The leases include annual CPI rent increases.
The portfolio is spread across New Zealand, but 72% of the properties are located in NZ’s top 3 cities.
The assets will be placed in a new Charter Hall managed fund to be owned 50% by Charter Hall Long WALE REIT (ASX:CLW) and 50% by Charter Hall Retail REIT (ASX:CQR). The total acquisition price to be paid by the two trusts is approximately NZ$262 million, which represents an initial yield 6.25%.
The day after the acquisition was announced Charter Hall Long WALE REIT filed two follow-on equity offerings of AU$60 million and AU$10 million to help pay for its share of the deal. The trust will dip into its existing credit facility to top up the proceeds from the equity offering. Charter Hall Retail REIT plans to fund its half of the transaction entirely through its current borrowing capacity.
Charter Hall Retail CEO, Greg Chubb said, “We are delighted to further our existing relationship with BP and partner with them in New Zealand. This investment is consistent with our strategy of partnering with major convenience retailers to meet their property needs and provide CQR unitholders with a resilient and growing income stream.”
The acquisition means that BP’s share of CQR’s portfolio income increases from 9.1% to 12.5%. The overall total portfolio WALE increases from 7.4 years to 7.9 years and major tenants WALE, of which bp is one, from 11.7 years to 12.2 years.
Completion of the transaction is subject to approval by the New Zealand Overseas Investment Office.