2 ASX 200 REITs on the rise following earnings updates

Investors are buying the dip on ASX 200 REITs in 2023.

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Key points

  • The Charter Hall Long WALE REIT and Arena REIT released their FY23 half-year results today 
  • Both ASX 200 REITs provided numbers demonstrating how they are offsetting inflation through inflation-indexed leasing 
  • Investors appear to be buying the dip on ASX 200 REITs, with the A-REIT Index up 8.7% in 2023 following a 24% dive in 2022

ASX 200 real estate investment trusts (REITs) are enjoying a resurgence in 2023, and today there are two heading northwards after reporting their FY23 half-year earnings.

At the time of writing, these two ASX 200 REITs are among the top five performers of the S&P/ASX 200 A-REIT Index (ASX: XPJ), which is down 0.45% for the day so far.

Let's take a look at what these two companies reported today.

Charter Hall Long WALE REIT (ASX: CLW)

The Charter Hall Long WALE REIT share price is up 1.5% to $4.69 at the time of writing. It opened at $4.64 — up 0.4% on yesterday's close — and reached an intraday high of $4.73, up 2.4%, in earlier trading.

This ASX 200 REIT invests primarily in offices, retail and industrial property, and social infrastructure.

WALE stands for weighted average lease expiry. Long WALE is the key appeal of this particular ASX 200 REIT. It means a more secure income, with leases typically indexed to inflation on a floating or fixed rate.

The Charter Hall Long WALE REIT currently has an average WALE of 11.8 years. Half its rental income is linked to inflation, with average increases of 7.2% on floating-rate leases and 3.1% on fixed-rate leases.

The highlights of this ASX 200 REIT's half-year results covering the six months to 31 December are:

  • Operating earnings of $101.2 million, or 14 cents per share
  • Distributions of 14 cents per share
  • Net tangible assets (NTA) of $6.23 per share, up 1% from $6.17 at 30 June 2022
  • $65 million net property valuation uplift, representing 0.9% over prior book values
  • Balance sheet gearing of 30.2%, within the target range of 25% to 35%.

Avi Anger, Charter Hall Long WALE REIT Fund Manager commented:

During 1H FY23, CLW has demonstrated the resilience of its portfolio.

… CLW has been well placed to benefit from a higher inflationary environment and manage the impact of higher interest rates.

CLW's portfolio valuation increased as a result of the Metcash lease extension and our inflation-linked leases which drove rental growth and offset cap rate expansion across the portfolio.

Arena REIT No 1 (ASX: ARF)

The Arena REIT share price is up 0.8% to $3.74 at the time of writing. It opened this morning at $3.66 — down 1.35% on yesterday's close — and reached an intraday high of $3.755, up 1.2%, earlier today.

Arena REIT invests primarily in properties leased to tenants in childcare, healthcare, education, and government.

The highlights of this ASX 200 REIT's half-year results covering the six months to 31 December are:

  • Net operating profit (distributable income) of $29.9 million, up 8.6% on the prior corresponding period (pcp)
  • Statutory net profit of $47.6 million, down 74% on pcp
  • Total assets of $1.58 billion, up 4% on 30 June 2022
  • Net asset value (NAV) per security of $3.42, up 1% on 30 June 2022
  • Earnings per security (EPS) of 8.59 cents, up 7.8% on pcp
  • Distributions per security of 8.4 cents, up 6.3% on pcp
  • Reaffirm FY23 full-year distribution guidance of 16.81 cents, up 5% on pcp.

This ASX 200 REIT has a WALE of 19.5 years. It reported a portfolio valuation uplift of $18 million, up 1.3% compared to FY22, and like-for-like rents increased by 6.45% on average.

Arena's managing director Mr Rob de Vos said:

Arena's investment proposition and partnership approach are integral to building better communities, together. This approach drives sustainable and commercial outcomes and underpins Arena's value proposition which provides inflation protected, long term income predictability with earnings growth prospects over the medium to long term.

Investors buying the dip on ASX 200 REITs in 2023

ASX 200 REITs went down fast in the 2022 sell-off, with the A-REIT Index diving 24%.

Today, investors appear to be buying the dip on ASX 200 REITs. Property shares are the second best-performing market sector so far in 2023.

The A-REIT Index is up 8.7% year to date. The leading sector is retail with the S&P/ASX 200 Consumer Discretionary Index (ASX: XDJ) up 10.6%.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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