Charter Hall Retail REIT Insulates with $275m Raise

Charter Hall Retail REIT is tapping the market for $275 million to shore up its balance sheet amid the coronavirus-related retail hit.

The institutional placement, led by JPMorgan and UBS, will provide Charter Hall with some room to manoeuvre as many retailers scramble to protect revenue and staff amid an ongoing national lockdown.

The group is seeking buyers for 94.8 million units at $2.75 each, according to terms sent to funds, in a deal that represented 20.3 per cent of its existing shares on issue.

Post-placement, the REIT's cash and undrawn debt facilities are forecast to increase to $407 million, while balance sheet gearing is expected to reduce to 22.6 per cent.

In addition to the $275 million institutional capital raising, Charter Hall also announced a $25 million unit purchase plan to shareholders in Australia and New Zealand.

The fresh funds will aim to provide financial flexibility for the Charter Hall-run retail fund which until now has sidestepped some of the impact of retail closures around the country.

To date, 87 per cent of the trust's anchor tenants remain open and trading, with sales performance of tenants significantly elevated during March due to panic buying, with performance returning to normal levels in April.

Major tenants include Woolworths, Coles, BP, Wesfarmers and Aldi, representing in excess of 51 per cent of the fund's rental income over March, with 60 per cent of the supermarkets currently paying turnover rent.

Just 7 per cent of the fund's monthly gross income was lost from tenants forced to close under government social distancing guidelines with Charter Hall stating tenants had been impacted by forced store closures.

Charter Hall said it would engage with impacted tenants to provide rental relief proportional to the reduction in trade.

The Charter Hall-run fund has been progressively selling off non-core smaller malls in regional locations and investing in bigger convenience centres in metro locations in recent times.

Late last year, Charter Hall Retail REIT bought a 20 per cent stake in a $281 million portfolio, comprising two suburban Sydney malls, originally owned by the Charter Hall Retail Partnership No. 6 Trust, which 80 per cent owned by global fund manager Mercer.

The fund also captured a 49 per cent interest in a portfolio of BP fuel and convenience retail properties and an Arnott's biscuit industrial facility in Sydney's western suburbs.

In addition to the $275 million institutional capital raising, Charter Hall also announced a $25 million unit purchase plan to shareholders in Australia and New Zealand.

Charter Hall Retail REIT went into a trading halt Monday morning.

In a similar move, Stockland secured $350 million in unsecured bank facilities following a sharp drop in yields amid growing recession fears.

The defensive move, to protect it during the current market disruption and into a recovery phase, followed its guidance withdrawal as uncertainty surrounds the impact of the virus ravaged property stocks.