The Charter Hall Long Wale REIT became the largest ever diversified real estate trust to list on the Australian Securities Exchange on Tuesday after its second attempt saw the trust take on more debt and give investors a higher yield.
Major global index fund manager Vanguard stepped into the float in an unusually early show of confidence for a property trust not yet included in an official ASX200 or ASX 300 index. While there was a substantial retail investment component to the trust, Charter Hall took up 16 per cent and listed securities fund manager BT also took a small stake.
The $827 million trusts opened at $4.01, rose to $4.02 and fell back to finish the days trading at $3.96.
"Getting to this point has been a lot of hard work," chairman Peeyush Gupta told a crowd at the traditional bell ringing event for what was the 95th listing on the ASX this year. "There have been a few plot surprises."
The metrics of the float changed following a call made by Charter Hall and its bankers, UBS and JPMorgan, to pull back from last's month's planned $1.1 billion IPO. The newly shaped trust, to be led by Charter Hall's Avi Anger, hit the board with a revised forecast 2017 dividend yield of 6.3 per cent, above the previously planned 5.3 per cent. The trust has also taken on more debt giving it balance sheet gearing of 22.9 per cent.
"Our view on the market is that there is a large gap between the yields we can acquire property at and the long term bond rates," Mr Anger said, "And that spread means there are attractive opportunities for real estate investment."
The fund will still have about $100 million in undrawn facilities for which to use for further acquisitions.
Mr Anger, who has been with Charter Hall for 14 years, said the diversity of the portfolio and the management team would give the trust an advantage in picking up good real estate investment opportunities ahead of competitors in a highly competitive market.
The revised fund has 66 properties valued near $1.3 billion that had been held across Charter Hall's unlisted platform.
The portfolio has a weighted average lease expiry, or WALE, of 12.5 years, twice the sector average. The $4 offer price was a 4.2 per cent premium to net tangible assets.
