Charter Hall Long WALE REIT (CLW) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Apologies for the minor delay ASX computers, but that's what happens in the world we live in today. Gliitches everywhere. Good afternoon. On behalf of the Board of Directors, it is my pleasure to welcome you to the 2026 Annual General Meeting of the Charter Hall Long WALE REIT, better known to us as CLW. My name is Glenn Fraser, and I am the Independent Chair of CLW Board of Directors. As the necessary quorum is present, I declare this meeting properly constituted and open. I'd like to commence today's meeting with an acknowledgment of country. Charter Hall acknowledges the traditional custodians of the lands on which we work and gather. We pay our respects to Elders past and present and recognize their continued care and contribution to country. This afternoon, I'm going to provide a brief overview of CLW from the Board's perspective. And Avi Anger, a diversified CEO and CLW Fund Manager will then provide an update on the REIT strategy, FY '26 operational and financial performance, recent investment activity and the outlook for FY '27. Following Avi's address, we will take questions before moving to the formal item of business being the reelection of Belinda Robson as an independent director. I would like to introduce my fellow directors. Ceinwen Kirk-Lennox, Independent Non-Executive Director; Ray Fazzolari, Independent Non-Executive Director; Michael Gorman, Independent Non-Executive Director; David Harrison, Executive Director and Managing Director and Group CEO of the Charter Hall Group; and Carmel Hourigan, Executive Director. Our new Director, Belinda Robson sends her apologies. Belinda is an Independent Non-Executive Director and unfortunately, is on the other side of the world, performing Board duties for another significant vehicle and was unable to attend. She had a preexisting business arrangement before took on the Board role, but having someone of Belinda's capability on the Board is no doubt going to be very helpful to see CLW going forward. Also present today are from the management team. Avi Anger, diversified CEO and CLW Fund Manager; Darryl Chua, CLW Deputy Fund Manager; and Erin Kent, Head of Diversified Finance. CLW is Australia's largest diversified net lease REIT, providing investors with an exposure to a high-quality portfolio of long lease properties occupied by leading corporate and government tenants. At 30 June 26, CLW's portfolio was valued at around $6.1 billion and comprised 505 properties. Occupancy remained at 99.9%, 99% of the portfolio is leased to blue-chip tenants and the portfolio WALE was 9.2 years. The portfolio generated average annual net property income growth of 3.1%. While 51% of the portfolio income was derived from triple net leases. These characteristics support resilient and predictable cash flows, with a significant proportion of property expenses borne by tenants. During FY '26, the portfolio benefit from active curation, earnings accretive investments and positive valuation movements while maintaining high occupancy and a long lease profile. Sustainability remains integrated across the Charter Hall platform and is an important contributor to long-term value for investors, customers and communities. During FY '26, CLW maintained its net zero Scope 1, Scope 2 emissions for assets under its operational control, supported by Charter Hall Group's renewable energy procurement and nature-based offset strategies. Installed solar capacity was 8.7 megawatts with 96% supplying tenants directly and 11-megawatt hours of battery capacity installed across the CLW industrial portfolio. The office portfolio maintained a 5.4 star NABERS Energy rating and a 4.7 star NABERS Water rating. CLW also scored 82 points in the 2025 GRESB assessment, a 4-point improvement and maintained an A ranking for GRESB public disclosure. Beyond environmental performance, Charter Hall Group employees contributed more than 3,700 hours. The group invested $350,000 in natural disaster relief and recovery initiatives and continued to advance reconciliation commitments and responsible supply chain practices. Your Board remains focused on strong governance, transparent disclosure and ensuring that CLW is managed in the best entrant of its security holders, and we thank you for your continued support. Today is my last day as Chair of CLW, as I retire at the end of today's meeting after 10 years of service on the board. Michael Gorman is our incoming Chair, and CLW is lucky to have such an experienced and competent property professional as Chair. I would like to take this opportunity to thank my fellow directors, the management of CLW and our security holders for all their support over the last 10 years. I'm confident that CLW its board and its management are well placed to drive CLW forward. I'll now hand over to Avi Anger, Diversified CEO and CLW Fund Manager.

Thank you, Glenn. I'll begin with CLW's net lease strategy and then review the FY '26 results, capital management initiatives, portfolio activity and our outlook for FY '27. CLW's objectives is to provide investors with stable and secure income while targeting both income and capital growth through a diversified portfolio of Long WALE properties leased to corporate and government tenants. Our strategy combines 3 core disciplines: strategic portfolio curation, active asset management and prudent capital management. The underlying net lease characteristics are equally important. Long-term leases, annual contracted rent increases, blue-chip tenants, mission-critical properties, diversification by tenant industry, location and property type, capital efficient lease structures under which tenants pay the majority of property expenses. . Turning to Slide 9. CLW delivered operating earnings per security and distributions per security of $0.255 and in line with guidance and representing 2% growth on the prior FY '25 year. Net tangible assets increased by 2.6% to $4.71 per security. And the portfolio delivered average annual net property income growth of 3.1%. Active portfolio curation resulted in $248 million of earnings accretive net acquisitions, whilst portfolio -- whilst the portfolio recorded a $188 million net valuation uplift equivalent to a 3.2% increase during FY '26. The portfolio WALE remained long at 9.2 years. Balance sheet gearing was 27.5% on a pro forma basis at the lower end of our 25% to 35% target range. We also completed the transition to a new $2 billion secured debt platform and reduced the average credit margin across balance sheet debt by 20 basis points to 1.2%. For FY '27, CLW is guiding to operating earnings per security of $0.255 and distribution per security of $0.255 based on information currently available and barring any unforeseen events. Turning to Slide 10. As I mentioned, during the year, we completed a comprehensive refinancing of CLW's balance sheet debt, establishing a new $2 billion secured platform. The refinancing extended the average debt maturity by 1.6 years to 4.3 years with staggered maturities from FY '29 to FY '32 and 10 separate lending counterparties. The average credit margin reduced by 20 basis points to 1.2%, delivering immediate interest cost savings and earnings accretion. The new platform also provides an improved covenant package, including a 65% balance sheet loan-to-value covenant, a 1.5x interest cover covenant and no look-through covenants. Together [Audio Gap] value covenant, a 1.5x interest cover covenant and no look through covenants. Together, these [Audio Gap] 5x interest cover covenant and no look through covenants. Turning to Slide 12. Charter Hall's diversified platform and sale and leaseback expertise have enabled CLW to invest approximately $1 billion of equity in Long WALE triple-net list assets. Across the investments shown on this slide, CLW has generated more than $1.2 billion of equity value and income, representing a 123% total return on invested equity and sense. This track record reflects both the quality of assets and leases acquired and the benefits of disciplined portfolio management over the investment period. Slide 13, CLW -- based on CLW's FY '27 distribution guidance of $0.255 and the closing security price yesterday of $3.22 and CLW offers a prospective distribution yield of 7.9%. As shown on this slide, the yield was above the comparison yields for Australian term deposits, the Australian 10-year government bond, 4 largest Australian banks, the weighted average AREIT yield and the ASX 200 dividend yield as at the date specified in presentation. Turning to Slide 14. We continue to increase CLW's exposure to Long WALE critical social infrastructure properties in strategic locations. In April 2026, CLW settled and increased interest in the Telstra Exchanges portfolio for $63 million. The portfolio comprises 36 properties leased to Telstra that are critical to Australia's national fiber telecommunications network. The leases are triple net and include annual CPI plus 0.5% rent escalations, and the portfolio has a 14.5-year weighted average lease term at settlement. Post balance date in July 2026, CLW settled the acquisition of a 25% interest in the Sonic Healthcare Integrated Pathology Laboratory in Brisbane for $53.4 million. the property subject to a 20-year triple net lease with a further 30 years of options and annual CPI-linked rent reviews capped at 3.5%. Turning to Slide 15. Active asset management also increased portfolio WALE during the year. At our Coles distribution center in Perth, practical completion was achieved for the new Coles store expansion during the second half of FY '26. On completion, the remaining lease term reset to 12 years across both the expanded and the existing facility. In November 2025, CLW acquired a 49.9% interest in the Coles core West distribution center under construction in Truganina in Melbourne's West. The 68,100 square meter automated facility is fully pre-leased to Coles for an initial term of 20 years and is forecast to complete in the second half of FY '27 with construction progressing well ahead of program. At our Bunnings Mackay South property, Bunnings exercised its option for a further 6-year term, which increased the remaining lease term on this property to 6.4 years. Slide 16. As at 30 June 2026, CLW held 505 properties with a total portfolio value of approximately $6.1 billion. The weighted average cap rate remained stable at 5.4%, occupancy remained at 99.9%, and the portfolio WALE was 9.2 years. Exposure to triple-net leases was 51%, while 54% of rent reviews were CPI linked with a weighted average rent review of 3.1%. The portfolio remains diversified across convenience, net lease retail, industrial logistics, data centers and social infrastructure and office assets as well diversified across geography and tenant industries. On Slide 17, we have some more details about the tenant industries that we have exposure to. CLW's tenant base is weighted towards defensive and resilient industries. Government tenants represent 21% of the income of the portfolio; hospitality convenience retail at 20%; grocery distribution, 13%; data center telecommunications 13; energy and convenience retail 11%. And then we also have exposure to banking, professional services, food manufacturing and other industries. This diversification combined with mission-critical assets and high-quality tenant covenants and support income resilience through economic cycles. Turning to Slide 18. And CLW enters FY '27 with a $6.1 billion diversified portfolio, long 9.2 WALE and occupancy near 100% with contracted rental increases across all leases. Active curation and asset recycling remains central to enhancing portfolio and tenant quality and recent transaction activities included in our FY '27 guidance. Based on information currently available and barring any unforeseen events, CLW's FY '27 guidance is operating earnings per security of $0.255 and distributions per security of $0.255. And as I noted earlier, based on yesterday's closing price of CLW Securities, that represents an attractive distribution yield of 7.9%. I would like to thank -- sorry, I'd like to thank the Board and the broader Charter Hall team for their support and our security holders for their continued trust. We remain focused on delivering stable and secure income and targeting both income and capital growth through CLW's diversified longwall net lease strategy. In closing, I'd like to thank Glenn for his significant contribution to CLW over the past decade and for his leadership as Chair since the REIT's IPO. As Glenn retires from the Board at the conclusion of today's meeting, I'm pleased to welcome Michael Gorman as his successor as Chair. Michael brings more than 3 decades of experience in real estate and the public equity and debt markets having held senior roles at Novion Property Group and its predecessor organizations, including Deputy Chief Executive, Chief Investment Officer and Fund Manager. I will now hand back to Glenn to open the meeting for questions.

Thank you, Avi. I'll now open the meeting to questions. If you could please introduce yourself and if you're representing a company, advise where you're from. And if you have more than 1 question, please ask them together so that we can respond efficiently.

Sorry, my name is [ Lindsay Summerville ]. Thank you. Why we don't have a webcast live for other shareholders to take notice of what's happening at the meeting. And how long have EY been our auditors? But it's not live. I don't think it's not live for people to come in now.

I think it is live. Yes.

Can I ask questions live there.

There is an opportunity for questions to be submitted prior to the meeting. So the -- and they can then they'll then be read out of the meeting and answered at the meeting. So all shareholders are invited to questions in the notice of meeting. .

Okay. But they can't ask them live now.

They can't ask them live. We don't have that functionality, but there's ample opportunities.

Is there any reason why we don't have that functionality. .

Well, it costs more money. It creates more effort and technology to set up and I don't -- not sure how much value it would add given there is an opportunity to submit questions very easily via e-mail prior to the meeting. .

Yes. Yes, I understand.

Your second question, Mr. [indiscernible] was Ernst & Young been auditing the FY '26 financial statements was the first year of order.

Okay. I have some other questions, but I'll somebody else.

Continue. I don't give it back to you.

Do we have the proxy advisers and what results do we get from many proxy advisers?