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Valuation of $4.00
Added 11 months ago

August 23:

Charter Hall have managed this REIT for the benefit of Charter Hall, not CLW unitholders. Charter Hall have chased FUM on the way up at the expense driving unitholder value.

Distributions are now below where they were in 2018. CLW has bought assets at the top, and will now need to sell on the way back down.


Cap rates are still well below where they were pre-covid. There's more valuation pain to come. Substantial asset sales will be necessary if cap rates get back to 5.4% - which given where bond yields are is entirely possible.


WALE has decreased and is nearly back to 2018 levels. It appears that most WALE expansion has been driven by acquisitions & divestments as opposed to renewals.


If cap rates get back to where the in FY18, NTA will fall around 25%, this fall, however I'd also argue 5.42% is still pretty low.

Hard to do a DCF without a good idea of where interest rates settle, although I'd be surprised if the distribution grows into FY25.

Feb 22:

I like CLW because of how simple it is, but there is simply no way that the current book values hold up with interest rates where they currently are. The portfolio cap rate of 4.41% is lower than the interest rate on an ING savings account at the moment. Additionally, as hedging roles off, interest costs are going to eat up increases in rental income and then some (provided rates don't decrease significantly).

The market is pricing in a bit too much upside at the moment, but I'm interested at a better price.

Nov 22:

Below was too bullish. The cashflows will decrease more in the short term - long term might be ok. I don't think the discount rate is right either. I think somewhere around $4 is closer to fair value.

March 22:

*edit* screenshot cut off rest of discount rate calc, it is not 2.58%!!! It's 2.58% + a 5% risk premium (so 7.58% in this case). May seem low but most of the stocks I analyse are not as risky as conventional stocks (they carry less market and business risk)

This fund continues to interest me due to its unique nature. The main things I grapple with are:

1) Rising long term interest rates pose a problem for a long duration portfolio like CLW's both in terms of higher cap rates and more expensive debt. 2) Charter Hall seem to be acquisition and fee hungry (recent ALE acquisition for example) 3) Some of these assets have high re-leasing risk 4) Gearing of 40% (look through basis) means creates big headwinds if cost of debt increases (it's currently at 2.1%.....)

Although income will likely keep pace with inflation due to the structure of leases (nearly 50% have CPI linked increases and the rest will be somewhere around 2-4% annual increases).

I find a DCF quite difficult as a lot hinges on interest rates and inflation. It's also unclear what sort of re-leasing potential some of these assets should the current tenants leave.

I've calculated that because look through gearing is 40% (not to be confused with balance sheet gearing) an increase in the average cost of debt to 3% (from 2.1% currently) would lead to extra $0.03 p/s in interest costs. This makes it very hard to forecast cashflows with any sort of conviction.

If I assume that because of hedging, interest cost increases will be subdued for the next few years and that afterwards contracted rental increases will be counteracted by rising interest costs before eventually returning to some sort of steady state I get the below:


$4.82 is my buy in price and due to low conviction would limit position size to 5%.

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