Property Fund Manager, Charter Hall Direct, has responded to a call by investors for investments aimed at seeing them through the current volatilities – through a fund that focuses on resilient property sectors and properties with long-term leases.

Charter Hall Direct Long WALE Fund (LWF) is an unlisted property fund with an established and growing portfolio of predominantly long WALE properties. It has been specifically designed for investors looking for more resilient investments in these uncertain times and the more consistent income that they can generate.

The benefits of long WALE

“Investors are increasingly looking for stable returns that provide high levels of income in the current low interest environment, and yet at the same time shield them from the ups and downs of the equities market,” explains Charter Hall Direct CEO Steven Bennett. “Our unlisted Direct Long WALE Fund draws on the benefits of investing in the commercial property market, with its competitive returns, at the same time as it lets investors enjoy the relative predictability of steady income from long-term tenant relationships and Charter Hall’s track record as one of Australia’s leading fully integrated property groups.”

Weighted average lease expiry or WALE indicates the weighted average lease term for a portfolio of properties. It’s an important metric, especially for commercial properties, because it indicates the likelihood of vacancies in a building. Whereas a lower WALE may indicate a higher turnover of tenants and an accompanying uncertainty around income, higher WALEs point to a stable tenant mix, regular cashflow and properties that are likely to be in higher demand.

Our first diversified Direct Long WALE offer

Charter Hall Group has a strong track record in this area. The Group has offered its listed Long WALE REIT for some time. That REIT has a diversified portfolio of properties, high occupancy and a long WALE. Charter Hall Direct Long WALE Fund has a similar mandate with some different features, as it is an unlisted investment. Being unlisted, it has less volatility than an investment in a stock listed on the ASX – however, that comes with less liquidity.

The range of resilient property sectors that the Fund invests in includes industrial & logistics, long leased hardware, convenience and long leased retail, and social infrastructure assets. The focus will be on providing investors with a mix of reliable income and the potential for both income and capital growth through an exposure to long WALE properties.

Miriam Patterson, Fund Manager in the Direct business, stated that “Our Charter Hall Direct Long WALE Fund will target quality properties that offer long leases to tenants in cyclically resilient industries or tenants that are dominant in their sector. These arrangements feature structured annual rental increases to maximise investor returns over the medium to long term. The Fund will also include properties with triple net leases – where our tenant is responsible for all the outgoings, capital expenditure at the property in addition to the rent payable.”  

“Of course, industrial and logistics is enjoying sustained investor interest at the moment because of all the changes happening in distribution and fulfilment in critical parts of the economy such as retail,” observes Miriam. “But other segments also display healthy characteristics for those with a long-term view and LWF will be actively investing in these.”

Social infrastructure assets deliver social and community services, including healthcare, education, energy, technology and transport. They have limited substitutability, together with a measurable economic and social benefit. They tend to have strategic locations and specialised features, with long WALEs often to single tenants.

Convenience based retail properties include service stations and they are characterised by long leases to single tenants.

Long-leased hardware is a sub-set of the retail sector and includes assets, such as those leased to Bunnings. This sector is characterised by strong tenant covenants and high investor demand.

A strong offering for the right investor

Steven and Miriam suggest those considering investing in the new Charter Hall Direct Long WALE Fund ask themselves three questions:

1. Are you clear on your investment objectives? Unlisted direct property investment offers sustainable and stable income plus the potential for capital growth. This requires a medium to long term investment horizon, as a direct property investment has limited liquidity.
2. Do you have confidence in the calibre of the tenants? At Charter Hall Direct we focus on working with customers that are well-known, stable and with excellent reputations. A long WALE reflects this because it shows the aggregate commitment of all the tenants in the building.
3. Are you clear about what you need in the current financial climate? Short WALEs do have their advantages in markets where demand is high, supply is short and the company wants to be able to change tenants regularly. For many in the current environment however, investments with longer-term horizons and predictable returns will be more reassuring and closer to what they are looking for while they come to grips with the current economic conditions.

Charter Hall Direct Long WALE Fund is an evolution of Charter Hall Direct Diversified Consumer Staples Fund, which has been relaunched with an expanded mandate to target resilient property sectors and tenants in essential industries. To find out more, we suggest you seek advice from your financial adviser or contact Charter Hall Direct for more information:

1300 652 790 | direct.property@charterhall.com.au