Aldi angle pays off as Charter Hall profits lift

The Woolworths in Chart Hall’s Rockdale Plaza in Sydney.

A focus on Woolworths, Coles and growing German chain Aldi is paying off for Charter Hall’s listed retail property fund as it looks to up its exposure to city markets.

The supermarket and convenience retail-focused group Charter Hall Retail REIT today turned in a steady result and flagged it would seek to buy more centres in metropolitan centres.

The group had a $53.1 million annual profit and lifted operating earnings to $128 million, which equated to 31.12c per unit, a 2% lift on last year. The distribution was also up by 2% to 28.76c per unit.

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The fund recently completed a $150 million institutional placement and a $14.7 million unit purchase plan to support the acquisition of Rockdale Plaza in Sydney and strengthen the balance sheet.

The convenience supermarket-anchored retail portfolio generated like-for-like net property income growth of 2.1%, up from 1.8% last year and as the fund renewed 175 specialty leases and struck 191 new leases it had positive specialty leasing spreads of 0.8% overall.

Despite tough times for larger centres exposed to department stores, the fund’s portfolio was up by $189 million, with income growth and development offsetting slightly softer capitalisation rates.

The fund last year also picked up Gateway Plaza and Campbellfield Plaza, both in Victoria, as part of its shift to more resilient centres and sold two smaller regional complexes.

Charter Hall’s retail chief executive Greg Chubb says the fund has a focus on convenience and convenience-plus assets in metropolitan markets, that were the dominant convenience centres in their catchments.

“We will continue to opportunistically look to sell assets and take advantage of opportunities to improve the portfolio,” he says. Three smaller centres have been contracted to sell this year for a total of $60.7 million.

Charter Hall has kept a strict focus on daily shopping and its major tenants Woolworths, Coles, Wesfarmers and Aldi account for 46% of rental income and they have been overhauling their centres. The Germain retailer, in particular, is on the rise and now has nine stores in the portfolio, that has expanded to include a Bunnings and an Officeworks.

The fund gave fiscal 2020 guidance for operating earnings to grow by 1.5% to 2% over last year and the distribution payout ratio range is expected to remain between 90% and 95% of operating earnings.

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