Charter Hall, with the backing of Hostplus, has put forward a $1.7-billion offer to buy out Australia’s biggest publican landlord, ALE Property Group.
The Charter Hall Long WALE REIT (CLW) would own a 50 per cent stake, while the superannuation fund would own the other 50 per cent.
The transaction would make CLW Australia’s largest and most diversified long WALE REIT with a market capitalisation value of about $3.8 billion.
CLW fund manager Avi Anger said it was an attractive transaction and would deliver a return to CLW and ALE shareholders.
“The transaction is consistent with CLW’s strategy to invest in high-quality real estate assets that are predominantly leased to corporate and government tenants on long-term leases,” Anger said.
“We are pleased to be able to continue our partnership with Hostplus, a leading superannuation fund, in investing in high-quality pubs and liquor retail outlets leased to Endeavour Group.”
The ALE board has unanimously recommended security holders vote in favour of the transaction.
Moody’s Investors Service vice president Saranga Ranasinghe said CLW’s financial position was likely to weaken as a result of the transaction.
“ALE’s pub properties are well located and subject to long-term leases to Australian Leisure and Hospitality Group Pty Ltd, a wholly-owned subsidiary of Endeavour Group which is an 85 per cent-owned subsidiary of Woolworths,” Ranasinghe said.
“These leases will provide CLW with predictable, stable and recurring rental income, with no or minimal capital spending obligations and limited outgoings.
“Despite CLW planning to fund the acquisition conservatively, we expect CLW’s financial profile to weaken given ALE’s high debt leverage, albeit it will remain within our tolerance levels for the rating.”
Almost all of the 78 properties in the portfolio are in metropolitan areas and 94 per cent are on Australia’s east coast.
About 95 per cent of the properties have triple net leases, and the weighted average lease expiry of the portfolio is 7.5 years.
The consortium has engaged Morgan Stanley and Ord Minnett as its financial advisors in relation to the transaction, which subject to approval would be implemented mid-December.