Charter Hall Long WALE REIT IPO Latest info and Price Discussion, page-3

there is 1 thing that may have been overlooked. good post by the way. good, thorough detailed investigations.

Re the extra $350M available. The idea is to deploy them and grow the yield. Problem is, the latest acquisition CHC they did was at 5.7% yield, the Coles HQ. If they bring it into the trust, then they have to pay 3.6% borrowing cost. Thats only 2% spread, Cost of debt is 3.6% or so and fluctuates depending on bank spreads.

Lets say it uses the debt $350M, it buys at 5.7% , same as Coles HQ.

350 * (0.057-0.036) = 7.35Million. Take out 1.6million in fees(45 basis point management fee on assets)= 4.59mil net increase in distributional profit.

Current full year 2018 earnings is around 63M incl a rent review in 2H 2018.

63+4.59 = 67.59 -0.50 straight lining

net = 67million.

67/280.2 units on issue = 0.239 cents per share distribution

yield is only 0.239/$4.00 = 5.9%, only 0.5% above 5.3%

so the problem is the yields they buy on in the future. quality assets with long leases are going for very high prices, whether it'll be accretive at all.

the current assets they have are at much higher yield- 6.4% than what they will find on future assets.