Childcare Boosts Charter Hall Social Infrastructure Fund

Australia’s biggest childcare centre landlord, with more than 400 childcare centres under its management, has seen profits across its portfolio bolstered by the government’s childcare relief package which drew to a close last month.

Charter Hall Social Infrastructure REIT recorded a 15.6 per cent lift in profits, up $51.1 million, while statutory profit grew by 25 per cent to $85.9 million.

Transaction activity during the period included the acquisition of 11 childcare properties for a combined $64.8 million at a purchase yield of 6.3 per cent with a further three existing centres contracted for $12.6 million at a purchase yield of 6.4 per cent.

Charter Hall also divested 37 assets for a total of $55.9 million as well as finalising new 20-year leases on 40 properties operated by Goodstart and five new 15-year leases with other tenants.

The group also noted that despite ongoing economic uncertainty 48 of 52 five-year options were renewed by tenants, increasing its WALE by 28 per cent to 12.7 years.

Around 15 to 20 per cent of its tenants would be defined as small- and medium-sized enterprises.

“The Covid-19 pandemic has resulted in significant challenges for the childcare sector, however the government support has demonstrated the essential nature of the sector,” Charter Hall fund manager Travis Butcher said.

“[The fund] is well capitalised to manage the ongoing impact of the pandemic and to take advantage of any attractive long WALE social infrastructure opportunities that may arise in the future.”

The social infrastructure REIT formally withdrew its guidance in late March and quickly sold down 26 of its early childhood education and care centres in New Zealand to an undisclosed buyer, leaving it with 20 assets across the Tasman.

It also increased its debt facilities to $500 million, providing undrawn capacity of $214 million to fully fund contracted existing property acquisitions and development pipeline.

In May, following a sharp drop in rental income recorded over April, the fund followed its placement with a further $100 million in fresh equity underwritten by JPMorgan and a non-underwritten unit-raise of $15 million from existing unitholders.

“Attendances at centres reduced to be between 25 and 35 per cent during the height of the pandemic in April, however, have subsequently recovered to be between 55 and 70 per cent,” Butcher said.

“Melbourne centres have now significantly reduced attendances due to stage-four restrictions in place.”

Charter Hall’s REIT completed five new developments during the year with a completion value of $27.5 million.

It currently holds a development pipeline of 24 properties with a forecast completion value of $149.2 million.

Queensland continues to be the REIT’s key state exposure and Goodstart Early Learning its largest tenant.