Charter Hall retail fund looks to essential shopping

A boost in sales from essential services shops offset reduced activity and the closure of specialty retailers across Charter Hall Retail REIT’s portfolio during the height of the pandemic but the fund took a hit to profit over the financial year as some of its shopping centre assets fell in value.

Charter Hall Retail REIT recorded a 16.8 per cent fall in statutory profit from $53.1 million to $44.2 million in FY20 after recording $67.8 million in writedowns on the value of investment properties.

The value of the REIT’s shopping centre properties declined by 2.4 per cent, or $70 million.

However, the fund’s strong tenant base, weighted towards major convenience retailers such as Woolworths, Coles, Wesfarmers, BP and Aldi, provided income resilience for the fund during the pandemic, said Charter Hall retail chief executive Greg Chubb.

“As we commence FY21, our expectation is that supermarket sales will continue to be strong, driven by stay-at-home and COVID-19 factors,” said Mr Chubb.

“Visitations to CQR centres have normalised in most regions and highlight the essential need associated with convenience retail. Our strategy remains focused on partnering with non-discretionary convenience retailers and providing income resilience and growth through a continuation of our acquisition and divestment strategy.”

The REIT provided $10.7 million in tenant support as a result of the COVID-19 crisis, collecting 79 per cent of rent due in the fourth quarter of financial 2020. About 15 per cent of rent was provided as tenant support and 6 per cent of rent was unpaid at the end of the period. Following collections last month, only 3 per cent of rent from the quarter remains unpaid.

During the year the REIT acquired an interest in 225 BP retail assets with a 19.4 year average lease expiry which has served to diversify and bolster the group’s portfolio.

Moody’s Investors Service vice president Saranga Ranasinghe said the fund’s results highlighted the resilience of its non-discretionary retail assets throughout the challenging operating conditions.

“The REIT’s convenience-based, and non-discretionary anchor tenants performed well due to increased demand for essential products, although its specialty tenants were affected by coronavirus-related trading disruptions.”

“While the REIT is well-positioned to manage continued headwinds in a challenging operating environment, uncertainty remains around the severity and duration of the outbreak and associated disruptions.”

As a result of the uncertainty surrounding COVID-19 the fund chose not to provide FY21 guidance.

Total distributions per unit were 24.52 cents, down from 28.8 cents — or 14.7 per cent — from the previous year.

Extracted from AFR

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