The Charter Hall Long WALE REIT (ASX: CLW) security price will be one to watch when it emerges from a trading halt on Wednesday.
What could move the Charter Hall security price?
The Charter Hall Long WALE REIT has entered into agreements to acquire several new sites across Melbourne, Sydney and Darwin.
The Aussie REIT will take a 15% interest in 242 Exhibition Street in Melbourne for $63.6 million, which is predominately leased to Telstra Corporation Ltd (ASX: TLS).
The move will strengthen the company’s relationship with Telstra following its August 2019 acquisition of the Telstra portfolio.
A 50% interest in The Glasshouse in Macquarie Park in Sydney will set the REIT back $165.7 million with a passing yield of 5.0%. The property is under construction with substantial pre-commitments to the NSW Government on a 12-year lease.
Charter Hall also bought Bunnings Palmerston in Darwin for $41.3 million with a new 12-year lease to Bunnings upon project completion.
Why is Charter Hall Long WALE REIT making these acquisitions?
CLW Fund Manager Avi Anger cited long leases to high-quality tenants as the motivation behind the $331.5 million acquisition spree.
Once completed, the Aussie REIT will have 158 properties in its portfolio, which are valued at $2,877 million.
Occupancy remains high at 99.7% with a weighted-average capitalisation rate of 5.7%.
How has the Charter Hall security price performed in 2019?
The commercial real estate REIT has seen its security price soar 39.76% higher since the start of 2019.
Strong earnings and high occupancy rates have been the key to unlocking value for REIT securityholders.
The Aussie REIT has been busy raising equity for further acquisitions as it aggressively expands its portfolio ahead of 2020.
Today was no different as the REIT announced a fully underwritten $242 million equity raising to partially fund the acquisitions.
This included a $120 million institutional placement at $5.50 per security and a non-renounceable offer for the remaining $222 million.
Should I add Charter Hall to my portfolio?
The Charter Hall Long WALE REIT could be a great diversification option for your ASX portfolio in 2020.
The REIT’s 4.79% dividend yield is right up there with the top ASX dividend stocks while commercial real estate can provide non-cyclical exposure.
While a little pricey at 21.7x earnings, I think the REIT’s shares could be a good addition to a diversified portfolio next year.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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