charter hall logo on frosted glass office window
Image – CDI Group.
  • Consortium to acquire 100% of LEP securities
  • Consortium includes CLW and Hostplus
  • Total enterprise value consideration is approximately $1.68 billion

A consortium managed by Charter Hall Group (ASX: CHC), comprising Charter Hall Long WALE REIT (ASX: CLW) and Hostplus have entered into a scheme implementation deed with ALE Property Group (ASX: LEP).

The consortium will acquire 100% of LEP securities, with security holders to expect $5.68 per LEP security, comprising $3.673 cash per LEP security, and 0.408 CLW securities per LEP security.

The total enterprise value consideration, including transaction costs, is approximately $1.68 billion (100% basis).

July proposal

ALE Property announced that it received an unsolicited, confidential, conditional, non-binding indicative proposal from the Charter Hall Consortium in July this year.

The ALE board then established an Independent Board Committee comprising all directors other than the Caledonia Private Investments nominee directors to evaluate the proposal.

The company said the governance arrangements were established to manage any potential conflict of interest for the Caledonia nominee Directors, should one arise.

August valuations

LEP said as part of its evaluation of the Charter Hall Consortium proposal, ALE Property obtained revised valuation assessments for its portfolio as at 30 August 2021.

The result of that valuation is as follows: the carrying value of ALE’s portfolio has increased by $73.98 million relative to carrying values at 30 June 2021 (+6.04%). The impact of this uplift would imply an increase in NTA per security from $3.71 at 30 June 2021 to $4.11 on a pro forma basis.

The recommendation by directors

The directors unanimously recommended ALE security holders vote in favour of the proposal made by the Charter Hall Consortium.

Caledonia currently holds a voting interest in approximately 33.6% of all ALE securities. They also confirmed to ALE that, based on the disclosed terms of the Schemes, it intends to vote in favour of the schemes in the absence of a superior proposal and subject to the Independent Expert concluding (and continuing to conclude) that the schemes are in the best interests of ALE security holders.

Other details

The first court hearing is expected to be in early November, so too the scheme booklet dispatch, scheme meetings and second court hearing. The implementation date is expected to be in mid-December of this year.

CLW portfolio impacts

Charter Hall Long WALE REIT will own 50% of LEP, CLW will also fund $0.833 of the $3.673 cash that will be paid per LEP security.

Pre-Transaction Post-Transaction
Number of properties 472 550
Property value $5.7 billion $6.5 billion
Occupancy 98.30% 98.40%
WALE 13.2 years 12.6 years
WARR 3% 2.90%
Proportion of NNN leases 47% 51%
Portfolio review type weighting: CPI-linked review/ Fixed review 39%/61% 45%/55%

Source: Charter Hall Long WALE REIT

CLW also said that the transaction represents an opportunity for CLW Securityholders to acquire a large scale, materially under-rented portfolio of high-quality hospitality assets.

Following the transaction, Charter Hall has indicated it will continue to be Australia’s largest and most diversified long WALE REIT with an estimated pro forma market capitalisation of approximately $3.8 billion.

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