Charter Hall Long WALE REIT made a subdued debut on its first day of trade as investors absorbed the new recut version that is now valued at $827 million and an increased longer term yield metric.
The original float valued at $1.12 billion was pulled in October after institutional investors rejected the forecast initial yield of 5.3 per cent, no balance sheet debt, and very small "look-through" gearing.
Having gone back to the drawing board,and to reflect the changes in the bond market, the new vehicle now offers a forecast 2017 dividend yield of 6.3 per cent, 22.9 per cent balance sheet gearing and 35 per cent on a look through basis and, as the name implies, a weighted average lease expiry (WALE) of 12.5 years.
The listing price was $4 and it closed the day at $....
The independent valuation was $1.25 billion for the 66 properties, which are a range of industrial, 47 per cent of asset value; office, 29 per cent; and retail, 24 per cent. The retail included 54 pubs and bottle shops.
The top four tenants accounted for 89 per cent of the leases, being Woolworths, Commonwealth of Australia, Metcash and Wesfarmers, and the float was advised by UBS and JP Morgan.
Charter Hall Long WALE REIT's fund manager will be Avi Anger, with Charter Hall Group's chief executive David Harrison, and Charter Hall head of office, Adrian Taylor, as executive directors.
The float comes as SCA Property, which owns food-based neighbourhood shopping centres, has emerged with a 4.9 per cent stake in rival Charter Hall Retail REIT, sparking suggestions of another round of corporate activity in the listed property sector.
The stake was bought with proceeds from the sale of SCA's New Zealand portfolio for about $255 million, which was announced in early June.
SCA Property's chief executive Anthony Mellowes said he was "happy with the stake" and it was an investment in the fundamentally strong sector.
According to Macquarie Equities analysts, they "continue to expect mergers and acquisitions in the REIT sector".
"This is due to generally challenging fundamentals and limited organic growth opportunities that we expect to persist in the near term; relatively low cost of capital still on offer (both debt and equity) making deals more financially appealing albeit the cost of equity has increased in the last quarter and SCA Property's relative inability to acquire assets in the direct market at favourable pricing given strong demand from unlisted groups," the analysts said.
They said, if there is any move on Charter Hall Retail (CQR) by SCA Property, its "likely to be a drawn-out process if it escalates".
Given Charter Hall group holds 16 per cent of CQR and is the external manager, depending on SCA Property's intentions with the retail trust, more broadly, it would likely have to move to have Charter Hall voted out as manager.
"SCA Property could also seek to be voted in as manager of CQR without necessarily merging the two vehicles, that is hold 5-10 per cent. With the recent re-cut of the Charter Hall Long WALE REIT float, we note it has been a difficult period for Charter Hall group," the analysts said.