Please note that this conference is being recorded today, Thursday the 12th, February 2026. I would now like to hand the conference over to your host today, Mr. Avi Anger, Diversified CEO. Thank you, sir. Please go ahead.
Good morning, everyone, and welcome to the Charter Hall Long WALE REIT results presentation for the 2026 half-year. Presenting with me today is Erin Kent, Head of Long WALE REIT Finance. I would like to commence today's presentation with an acknowledgment of country. Charter Hall acknowledges the traditional custodians of the lands on which we work and gather. We pay our respects to elders past and present and recognize their continued care and contribution to country. The format for today's presentation is that I will start with an overview of CLW and key highlights for the FY 2026 half-year. You will then hear from Erin, who will provide an overview of the financial performance of the REIT. I will then return to provide an operational update and portfolio overview and provide guidance for FY 2026. We will then offer the opportunity for questions.
Turning now to slide 4 and key highlights for the half-year. I am pleased to report that we have delivered operating earnings of AUD 12.75 per security, representing 2% growth on the prior corresponding period. Our NTA at 31 December is AUD 4.68 per security, an increase of 2% from June 2025. The portfolio delivered 3% growth in like-for-like net property income, with 52% of income of the REIT being CPI-linked and the balance being fixed reviews. 86% of the portfolio was independently valued during the half-year, with AUD 139 million net valuation uplift achieved, representing an increase of 2.8% for the properties independently valued. The portfolio is sitting at a very high occupancy level of 99.9%. CLW has a long WALE of 9.2 years providing security and continuity of income to our investors.
We completed AUD 1.1 billion of new interest-rate hedging, with average forecast hedging of 80% for the balance of this financial year. We remain focused on prudent capital management. Balance sheet gearing is 29.8%, within the target range of 25%-35%. In December 2025, Moody's reaffirmed CLW's Baa1 investment-grade credit rating. We are pleased to reaffirm FY 2026 guidance of operating earnings and distribution per security of AUD 0.255, reflecting 2% growth over FY 2025. Turning to slide five. Today, CLW has a best-in-class AUD 6 billion diversified real estate portfolio secured by long leases to blue-chip tenants, with a weighted average lease term, or WALE, of 9.2 years. Our portfolio has an occupancy level of 99.9% and continues to be diversified by tenant, industry, geography, and property type, which contributes to the stability of our cash flow. Our portfolio has delivered strong like-for-like net property income growth of 3%.
CLW has 49% of its income derived from triple-net lease properties. This is an important feature of our portfolio, given that under a triple-net lease structure, the tenant is responsible for all outgoings, maintenance, and capital expenditure. The security of income of the REIT is also reinforced by the high-quality income stream generated from blue-chip tenants, with 99% of the tenants of the REIT consisting of government, ASX, multinational, or national businesses. Our largest tenants are federal and state governments, Endeavour Group, Telstra, and BP. All leases in the portfolio have annual rent increases, with 52% of annual rent reviews linked to CPI, with the balance being fixed reviews. Turning to slide 6. In the following slides, I would like to provide an overview of the net lease real estate sector, its unique and distinguishing features, and why we believe it's an attractive investment proposition.
The net lease real estate sector is a sleep well at night investment class, providing investors with stable and resilient income. Long-term leases provide resilient and predictable cash flows. Tenants are blue-chip, best-in-class operators, which reduces default risk. Properties are mission-critical to tenants, which reduces vacancy risk, and portfolios are diversified by tenant, industry, and property type. Turning to slide seven. On this slide, we outline the features that make CLW Australia's largest and most diversified net lease REIT. CLW has predictable long-term rental cash flow as a result of its long 9.2-year WALE and 30-year WALE-plus. The CLW portfolio has average annual rent increases of 3.1%, with 52% of lease rent reviews being CPI-linked. CLW's portfolio has relatively minimal landlord expenses as a result of the net, double-net, and triple-net leases in the portfolio. CLW features blue-chip tenant covenants, with portfolio occupancy consistently near 100%.
99% of leases are to secure government and leading ASX-listed, multinational, and national tenants operating in nondiscretionary essential industries. CLW's portfolio is diversified across core property sectors, and 79% of the portfolio is located on the eastern seaboard in prime locations. Turning to slide eight. CLW provides an attractive distribution yield relative to domestic and global investment options. Based on yesterday's closing price of CLW securities, CLW is forecast to deliver a 6.8% distribution yield in FY 2026. This distribution yield is considerably higher than what are often considered alternative investment options such as Australian government bonds, Big Four banks, term deposits, the A-REIT index, and the ASX 200 index. I would now like to hand over to Erin, who will provide an overview of the financial performance of the REIT.
Thank you, Avi, and good morning to everyone on the call. Commence on slide 10, which provides a summary of CLW's earnings for the first half of FY 2026. The REIT achieved like-for-like net property income growth of 3%, which has been further supported by net transaction activity adding incremental income to the portfolio in the current period. Finance costs have increased by 13.6% due to the higher average debt drawn in the first half of FY 2026 to fund transaction activity, combined with a higher weighted average cost of debt in the current reporting period. Both operating earnings per security and distribution per security for the first half of FY 2026 were AUD 0.1275, representing growth of 2% on the prior corresponding period and in line with our guidance provided to the market. Turning to slide 11 and CLW's balance sheet position.
During the current reporting period, the REIT completed AUD 376 million of net property acquisitions, including the on-completion value of the new Coles Distribution Centre in Truganina, which Avi will talk through shortly. 86% of CLW's portfolio was independently valued throughout the last six months, resulting in a total portfolio valuation uplift of AUD 139 million. The REIT's NTA per security is AUD 4.68 as at 31 December 2025, reflecting an increase of AUD 0.09 since 30 June 2025, driven by the positive revaluations achieved during the half, which was partly offset by the fair value movement of debt and derivatives.
Turning to slide 12, which provides a summary of the REIT's capital management initiatives. During the first half of FY 2026, CLW completed approximately AUD 700 million of earnings-accretive debt refinancing initiatives. AUD 270 million of new facilities were established on CLW's balance sheet to fund the acquisitions completed in the half.
These facilities were 5-year terms and reflected 5-10 basis points lower all-in margins versus CLW's current bank facilities. New and refinanced secured debt facilities of AUD 430 million were successfully completed within CLW's joint venture investments. This includes the establishment of a new AUD 375 million secured debt facility within CLW's ALE joint venture partnership, which was previously an unlevered investment. This refinance generates an equivalent capital return to CLW's balance sheet. Financing within the joint venture structure, which owns a high-quality, diverse portfolio of 80 properties, resulted in a superior pricing outcome of over 20 basis points lower weighted average credit margin. An additional AUD 55 million of existing joint venture facilities were also refinanced during the period, resulting in an enhanced covenant package and reduced margins of 20-45 basis points.
As at 31 December 2025, balance sheet gearing was 29.8%, calculated on a pro forma basis, including the return of capital to CLW from the refinance of the ALE partnership. Look-through gearing sits at 41%. The REIT has total facilities calculated on a look-through basis of AUD 3 billion, with a weighted average debt maturity of 3.4 years and a smooth expiry profile from FY 2027 through to FY32. Moody's has also reaffirmed its Baa1 investment-grade credit rating for CLW. As at 31 December 2025, CLW's weighted average cost of debt was 4.4%, based upon look-through debt drawn of AUD 2.5 billion and look-through hedging of AUD 1.8 billion at an average fixed rate of 2.6%. During the period, the REIT progressively established AUD 1.1 billion of new hedges across its balance sheet and joint venture investments.
This has resulted in materially higher hedging coverage of 80% across the second half of FY 2026 and 71% on average during FY 2027. I will now hand back to Avi to provide an operational update and portfolio overview.
Thank you, Erin. In the following slides, I would like to provide an operational update, overview of our portfolio, and some key attributes to the portfolio. Turning to slide 14. During the half-year, we settled AUD 376 million of net transactions, consisting of AUD 455 million of acquisitions and AUD 79 million of divestments. The acquisitions settled consist of acquisitions announced at CLW's 2025 full-year results in August last year, together with the investments announced today in the Coles Core West Distribution Centre and the Charter Hall Long WALE Office Partnership. The divestments consisted of the sale of CLW's interest in the Coles Distribution Centre in Truganina and non-core divestments from our BP Australia and ALE Pub portfolios. The decision was made to sell our interest in the existing Coles Distribution Centre in Truganina and reinvest these proceeds into the new Coles Distribution Centre in Truganina.
This is an attractive WALE-enhancing transaction for CLW, converting a 6.6-year WALE to a 20-year WALE from completion. Further details are included on the following slide. In our BP portfolio, which is co-owned alongside BP, BP identified 2 properties over the past 6 months that were considered non-core and recommended these for sale. As previously reported, in our ALE portfolio, we sold the Brunswick Hotel after receiving an unsolicited offer. The property was sold at a 75% premium to our purchase price and 10% premium to our December book value, demonstrating the embedded value of our Long WALE portfolios. Turning to slide 15. We are pleased to announce that CLW has acquired a 49.9% interest in a super-prime automated distribution centre currently under construction in the core industrial market of Truganina in Melbourne's west. The facility is 100% pre-leased to Coles for an initial 20-year term.
On completion, the facility will be a 68,100-square-meter state-of-the-art distribution center and is expected to service all stores in Victoria and Tasmania and will integrate into Coles' existing supply chain in South Australia and Western Australia, with significant investment by Coles in the automation capabilities of the facility. Construction is expected to complete in 2027, with a forecast on-completion value of AUD 440 million, with CLW's share being AUD 219.6 million.
Turning to slide 16. CLW has acquired a AUD 17.6 million equity interest in a new Charter Hall Long WALE Office Partnership alongside Charter Hall Group and an institutional capital partner. The partnership owns a portfolio comprising interests in five modern prime office buildings in core CBD markets. The portfolio is 98% occupied and leased to Commonwealth and state government and blue-chip multinational tenants, with an 18-year portfolio WALE at the time of acquisition and average fixed annual rent reviews of 3.8%.
Slide 17 is our portfolio overview. At 31 December, the REIT consisted of a portfolio of 515 properties valued at approximately AUD 6 billion. The portfolio average cap rate is 5.4%. The portfolio is virtually fully occupied, with an occupancy of 99.9% and a long-dated WALE of 9.2 years. At December, CLW had 49% of its income derived from triple-net lease properties. This is an important feature of our portfolio, given that under a triple-net lease structure, the tenant is responsible for all outgoings, maintenance, and capital expenditure. The properties in the portfolio feature a blend of annual lease review structures, both fixed and CPI-linked. The mix of annual rent reviews resulted in a weighted average rent review of 3.1%. Turning now to slide 18 and an outline of our tenant customers and the tenant diversification of the REIT.
Our portfolio of Long WALE properties is leased to high-quality tenants, including government, Endeavour Group, Telstra, BP, Metcash, and Coles. The REIT's largest tenant exposures are to government tenants and best-in-class pub and bottleshop operator, the AUD 6.5 billion Endeavour Group. In the data center and telecommunications sector, we have a partnership with another best-in-class operator, the AUD 55 billion Telstra Corporation, which includes our portfolio of 37 exchange properties on long triple-net leases. Our BP Australia and New Zealand portfolio of 285 properties on long triple-net leases provides us with exposure to the resilient fuel and convenience retail sector. We also have a high proportion of tenants operating in the nondiscretionary grocery and food sectors such as Woolworths, Coles, Metcash, and Arnott's. Turning to slide 19 and the industry diversification of our tenant customers.
Within our overall portfolio, approximately 99% of tenants are ASX-listed government or multinational or national corporations, with the vast majority of these tenants operating in nondiscretionary defensive industries. The REIT's major sector exposures are to convenience retail, government, data centers and telecommunications, grocery, and food manufacturing. Turning to slide 20 and the geographic and sector diversification of the REIT. Our portfolio is diversified by geography and sector type. 79% of the portfolio is located on the eastern seaboard in prime locations, while the REIT's largest sector exposures are to the convenience net lease retail and industrial and logistics sectors. Turning to slide 21. As can be seen from the chart on this slide, the REIT's portfolio has a long-dated lease expiry profile and reflects a low-risk position relative to our peers in the sector. Our portfolio WALE is a long-dated 9.2 years.
We have minimal leases expiring in the near term, and we are in discussions with a number of tenants with expiries in FY 2026 and beyond regarding lease renewals and extensions. We continue to work to push out our expiry profile as far as possible to the right of this chart, both through portfolio curation and negotiating lease extensions with our valued tenant customers. On slide 22, we would like to outline that a significant portion of CLW's portfolio is comprised of properties that are of critical importance to the business operations of our tenant customers, with the tenants likely to be in occupation well beyond the current lease term. 49% of CLW's portfolio consists of triple-net leases, and if these tenants were to remain in occupation for all option periods under their leases, this would increase the WALE of the portfolio to 30 years today.
This is particularly relevant in the context of our Endeavour Leased ALE portfolio. This represents approximately 11% of CLW's portfolio by income, with an expiry and market review in November 2028 less than three years away. This is dragging down the average WALE of our portfolio. These properties are very important to Endeavour's business, with the tenant likely to remain in occupation of these properties at expiry of the current lease term. This also represents a significant positive market rent reversion opportunity for the REIT. Turning now to slide 23 and environmental, social, and corporate governance. We remain focused on implementing sustainability initiatives across our portfolio and consider ESG as a driver of long-term value for investor and tenant customers. As a business, we've taken accelerated climate action. CLW has maintained net-zero, scope one, and two emissions for assets that fall under the operational control of Charter Hall.
Additionally, CLW has been focused on clean energy transition, with 9.4 megawatts of solar installed across its portfolio and an increase of 500 kilowatts over the past six months. CLW's predominantly modern office portfolio features high environmental credentials, with 5.4-star NABERS Energy and 4.9-star NABERS Water ratings, an uplift of 0.2 stars over the past six months. CLW remains committed to aligning with best practice frameworks to support transparency and disclosure. The fund achieved a score of 82 in the 2025 GRESB assessment, a four-point increase from last year. These preceding slides demonstrate the resilience and strength of our portfolio. Our portfolio WALE, quality of tenants, and proportion of triple-net leases provide better downside protection and more resilient income streams for our investors. Turning now to slide 25.
CLW's strategy is to provide investors with stable and secure income and target both income and capital growth through an exposure to a diversified portfolio leased to corporate and government tenants. The portfolio maintains a long 9.2-year WALE, and occupancy remains near 100%, with leases to secure blue-chip tenants underpinning stable rental cash flow, which continues to grow with annual rent increases. Active curation and asset recycling continues to enhance portfolio and tenant quality, with recent transaction activity included in the FY 2026 guidance. Based on information currently available and barring any unforeseen events, CLW reaffirms its FY 2026 operating earnings per security of AUD 0.255 and distribution per security of AUD 0.255, which reflects 2% growth over FY 2025. This is a distribution yield of 6.8% based on yesterday's closing price of CLW securities.
Finally, I would like to acknowledge and thank the teams of people across the Charter Hall platform that contribute to the performance of CLW and the results delivered today. The Charter Hall Group provides the REIT with access to a high-caliber team of experts across all areas of the REIT's management and provides CLW with access to a best-in-class management platform. That concludes the presentation, and I would now like to invite questions.
Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Richard Jones with JP Morgan. Your line is open.
Good morning, Avi. Hey, just wondering if you can talk me through your thoughts around balance sheet gearing versus look-through gearing. Which measure do you focus on, and I guess why do you see that being more relevant?
Hi, Richard. Thanks for the question. Look, we have a balance sheet target, as you're aware, of 25-35, and we sit comfortably within that range. We provide look-through gearing measure as well, given that our covenant is pegged to that, so we give that measure as well, but bearing in mind that we have sufficient buffers to those covenants. And also, in our underlying JVs, we've got plenty of headroom to covenants as well. So they're both relevant at present, but the balance sheet one is the one that we have the target towards and probably the more relevant one going forward.
Okay. Can you clarify how much capital was released from the ALE debt facility being put in place?
Yeah, sure. Hi, Richard. There was about AUD 340 million representing CLW's 50% share released back to balance sheet.
Thanks, Erin. Just on the Coles DC acquisition, what was the yield on cost amount, and what are the six escalators?
Yeah. Look, Richard, we're limited in the information we can provide on that, given it is commercial in confidence between us and Coles. So we could only provide, at this point, the information that we've given in the presentation.
Okay. And then.
Suffice to say, I can say, though, what I can say, Richard, is that it is accretive to us. So the yield at which we sold our existing Coles facility is lower than the yield on which the yield on cost will achieve through this development. So it's accretive in that sense, and the rent reviews are also better than what we've got.
Okay. Thanks, Avi.
Our next question comes from the line of Simon Chan with Morgan Stanley. Your line is open.
Good day, guys. Hey, a couple of simple ones. So what's your average debt margin across your portfolio now that you've done all this debt restructuring, jamming stuff into the ALE level, etc.?
Hi, Simon. Our all-in margin across the entire platform has come down closer to 140 basis points.
What's the quantum of savings there relative to before all these activities?
We were sitting at around 145 before the restructuring to the JVs.
Okay. Okay.
If it's been coming down, Simon, we were at 150, then 145, now 140. I think we are seeing competitive margins, and the banks, treasury teams done a great job at being able to secure and refinance our facilities at attractive margins. At the moment, based on other discussions that are going on, I wouldn't be surprised to see that coming down. Yes, we've got some headwinds with rates, but I think we've got a little bit of tailwinds as well with those margins. Yeah, that's sort of the way we're seeing things at the moment.
You reckon it could head towards 120, like as low as some of your other stablemates, or because the asset class is different, we shouldn't hold you to the same benchmark?
Look, I don't want to be held to numbers at this point, but I think we can, as I mentioned, I think I'd like to see that number coming down going forward, but we'll keep working with our treasury team and hopefully can deliver some positive news in future results periods.
Look forward to that one. Hey, can you give me a bit of a color on this Long WALE Office Partnership? What's the rationale there? I mean, AUD 17 million bucks is not exactly a huge number. Is there a strategic reason for owning the stake? And also, what is this fund? Because from memory, 275 George and 10 Franklin were assets that were in chapter two, right? So is this partnership more of a fund-of-fund style investment?
No, look, I'll give you the background to this. So there's a few questions in that sort of what you've just said, so I'll try and sort of separate them out. So the rationale is that we believe that long lease, modern, high-quality core CBD office is going to perform very well going forward. We've seen cap rates expand, and unlike other sectors, haven't started contracting yet. We see very strong tenant demand for that type of office, which is different to, say, other, less desirable types of office products. So we see a lot of upside going forward in sort of modern core CBD long WALE office. The WALE of this portfolio fits what we're about, given it's sort of an 18-year portfolio WALE with some of the properties, the two largest investments in that portfolio having close to 30-year WALEs. So that ticks the WALE box for us.
We would have liked to make a larger investment in that partnership. We're somewhat limited at present, but it's something we can look at in the future, and we're able to secure a position that we can build on, given that some of it is owned still by Charter Hall Group. And that's sort of the thesis behind it. Did I miss? I may have missed part of the question, but I think that covers most of it.
Yeah, that covers most of it. The other part's just in relation to 275 George and 10 Franklin. I thought they were actually the two assets.
No, so this is one that's part of it, and then part of it is owned in this vehicle. But I might just say that those two assets are the smallest interests in the portfolio, and they probably represent not even about 15% of the overall. So they're pretty small. The largest two assets in the portfolio, so sort of 60% of the portfolio, is made up of an interest in 52 Martin Place, which is a 30-year WALE to New South Wales government, and 140 Lonsdale in Melbourne, which is a 27-year WALE remaining to Australian Federal Police. So that gives you a bit more color around the portfolio. By far, the largest weightings are to that flavor of asset as opposed to the two you've mentioned.
That's very clear, mate. Just one more from me. Hey, Telstra Canberra, what's the latest there?
Well, as we mentioned previously, they're vacating. We secured a six-month extension with them over part of the building. So they'll start vacating part of the building in the next month or two and then the balance at the end of the year. We've been active in the market talking to potential tenants. We're having good dialogue with tenants on that building, and we've had good interest. What's good about that property is that it's a good size for Canberra, being about 14,000-odd square meters in the heart of the Canberra CBD. It's a very prominent corner location right next to the Canberra Centre, which is the largest sort of best-quality regional mall in the ACT. That area is probably considered the CBD of Canberra. So we've got interest from both private and government-type tenants.
I'm hopeful that we can provide some more updates on progress on leasing at our next results. But I'm encouraged by the interest we're seeing.
That's very good. Thanks, Avi. Thanks, Erin. Cheers.
Thank you. Please stand by for our next question. Our next question comes from the line of Daniel Lees with Jarden. Your line is open.
Good morning, Avi and Erin. I've just got a question on the ALE portfolio. Can you just give us a sense of how under-rented that portfolio is today, and perhaps if you've got any potential to bring the negotiation forward?
Yeah, sure, Daniel. Look, as we've mentioned previously, at the time of acquisition, the ALE Trust that we acquired had come out to the market and said that their view was the portfolio was about 30% under-rented. We haven't come out with a number. Although we are very strongly of the view that it's improved from when we acquired the portfolio, so that's probably increased. But we're not going to give our number because that's going to be a negotiation that we're going to have to enter into with Endeavour Group when the market review comes up in November 2028. So it's significantly under-rented, and we'll work towards that market review in November 2028. Bringing it forward, there's no active dialogue in relation to that, but we're open to discussions if they were to eventuate.
Great. Thanks for that. Just on the Department of Defence in Canberra, any views on your strategy there, any approach for the shorter WALE lease assets there, and what you're doing about it?
Yeah. I mean, the approach there was always to work with that tenant. We're a long lease REIT, so to work with the tenant to keep them in occupation, extend the lease. So that's the strategy, and that's what we'll be working towards.
Okay. Thanks very much.
Okay. Thanks.
Thank you. Please stand by for our next question. Our next question comes from the line of Solomon Zhang with UBS. Your line is open.
Good morning, Avi. Erin, thanks for your time. Maybe a question for Erin. It's good to see the lift in hedging, and it looks like you've sort of swapped or hedged at the mid-three range. Just wanted to confirm, did you put up capital for the swaps in the period? The reason I ask, I can see a reference to payments on the derivative financial instruments in the cash flow statement, but it hasn't been separately split out. Thanks.
Hi, Solomon. Yeah, there were some usual swap execution costs, although these were minimal. And I think, as you've noticed, our hedge rates have increased due to us layering in close-to-market-based swap rates. So it's very immaterial in the period.
Yeah. You'll see in our if you compare the swap charts from last period to this period, you see the rates gone up. So that reflects the market, right?
Yep. Yeah, that's correct. So it was pretty immaterial in terms of the size of the amounts paid. Could you quantify it?
Yeah. They were just the amounts we would need to pay in terms of upfront execution costs that we'd ordinarily incur.
Yep. Gotcha. Maybe just phasing of the new Coles DC CapEx. Could you just talk to that?
Sorry, what was that? Can you repeat the question?
The phasing of the new distribution center, Core West. Could you just talk to how the phasing of the CapEx looks like over the next year?
Yeah, yeah. Sure, sure. So that's going to complete in 2027. So over the next year and a half, we're about halfway there. So we've contributed about half of the AUD 220 million to date, and then over the next 18-24 months, we'll fund the balance.
Perfect. Thanks, everyone.
Okay.
Thank you. Please stand by for our next question. Our next question comes from the line of Suraj Nebhani with Citi. Your line is open.
Oh, hi. Good morning. Maybe, o ne question for Erin first. Just on this ALE facility, is it fair to say that essentially that who puts the gearing out of the balance sheet into the joint venture? Is that the way to think of it? And then what happens with the capital that comes back? Are you paying out debt at the balance sheet level?
Yes. Hi, Suraj. This facility was within that joint venture structure, so it did result in a reduction in our balance sheet debt drawn number, and it also reduces our investments in JVs line within total assets, as this is now a share of a net JV investment number rather than a gross.
Okay. Perfect. That makes sense. And I guess just one question, Avi, for you on the development asset with Coles. Obviously, you acquired on an on-completion basis over here. Are you looking at more such deals in the future, and how do you think about the appetite that you guys have and maybe the capacity from a balance sheet perspective?
Yeah. I mean, as you know, Suraj, we're always looking for sound lease back or long WALE deals like this. It's been a large part of what we've done since we listed almost 10 years ago. So it's very much on our radar. How we fund those deals going forward is going to be a combination, as you've seen, of recycling, as we've done in this instance where we've taken an asset, sort of an older one with a shorter WALE, and we're able to recycle the proceeds of that into this. We'll look at opportunities like that. And we'll also, as time passes and the market inevitably moves in cycles, we'll hopefully get back to a point in the not-too-distant future where we can grow through actively raising capital. But both those sources of funding new deals are available to us.
So yeah, I look at and we're very fortunate that as part of the Charter Hall Group, we get access to those type of deals. That's not a deal that was available on market. That was something that Charter Hall was able to negotiate and secure, given our relationships with the likes of Coles. So we'll continue to look at deals like that, and we're fortunate to have the opportunity to do those.
Perfect. And one final one, Avi. There were some comments. I mean, there's obviously a chart in the presentation around the attractive distribution yield. I agree, almost 7% is a very good yield. I guess if you look at it on a price-to-NTA basis as well, the stock is obviously pricing a big discount to NTA, which is going into the yield number. But do you, as a management team, I guess, from your perspective, how are you thinking about being able to close that discount? I know in the past, you resorted to an AUD 50 million buyback as well. Is that on the cards or some other measures that you can take?
Yeah. Look, I think at the moment, we're in a volatile market. Not that long ago, only a few months ago, we were AUD 4.70, and now with circa AUD 3.75 or AUD 3.80, the price is jumping around a lot. We're a volatile interest rate environment is impacting that. I'm hopeful it's short-term. As you say, it's a very attractive distribution yield. It's a large discount to NTA, and I think performance and delivering on earnings, delivering on earnings growth, that's the way we're going to keep delivering value for investors and close that gap, and that's what we're focused on. There's no intention at this point to do a buyback.
Thank you.
Stand by for our next question. Our next question comes from the line of Ben Brayshaw with Barrenjoey. Your line is open.
Hi, Avi. Just on the DC you acquired in Truganina, I just wanted to, I guess, clarify. Will Coles be relocating out of the building that you previously owned, or is it a new requirement that will support the lease for the fund-through?
Yeah. I'm not aware of what their intentions are for the building that we've divested. They still have close to 7 years on that lease, and it's a growing business. They may well look, I don't know, but they may well retain that and use the new one. But I'm not privy to that information.
No problem. And just on the pricing, Chief, for the sale, are you able to clarify how that compared with the book value at 30 June prior to the transaction?
It was at book value.
Okay. Great. That was my question. Thanks.
Thank you. Please stand by for our next question. Our next question comes from the line of David Pobucky with Macquarie Group. Your line is open.
Morning, Avi, Erin, and team. Thanks for your time. I just want to follow up on look-through gearing, which is now at 41%. Are you able to provide where covenants sit, and does that level and the fact that rates have moved higher constrain your ability to acquire for growth without continuing to divest lower-yielding assets?
So, David, in terms of where our covenant sits, the current target—sorry, the current covenant's 50, and there's sufficient headroom there, particularly what we're seeing with valuations increase. And we expect, notwithstanding movements in interest rates, I think cap rates have stabilized, and we have rental growth year-over-year coming through the portfolio that should continue to drive valuation growth. We're very comfortable with where we sit on that front, but in terms of new acquisitions, we'd need to, as I mentioned earlier, recycle or look at points in the market and the cycle where we can continue to grow through equity raisings or something like that. But there's no intention at this stage to do more debt-funded acquisitions if that's the question.
Thank you. Just to follow up on the Coles DC as well, what's the development risk? Is there a construction or income guarantee, builders coupon, anything of the like?
It's just a straight construction of a facility that's 100% pre-committed to Coles. We have a builder delivering the facility. The vast majority of risk has been absorbed by the builder, so that's how we would usually structure those type of deals.
Thank you. Just one final one around guidance. Are you able to provide what weighted average cost of debt is in guidance, and has that changed since the start of the year given the debt initiatives you completed? Thank you.
The weighted average cost of debt's remained. The guidance hasn't changed, so we've reaffirmed guidance today. So the weighted average cost of debt is as per the pack, yeah, for our.
Yeah. So we expect over FY 2026, we'll be at around that 4.4%, and that doesn't move much from 31 December given we've just rolled our March quarter debt at 3.8 floating, and we've assumed market floating rates over that last quarter. And the hedge percentage is obviously outlined in the pack as well.
Great. Thank you very much.
Thank you. As a reminder, ladies and gentlemen, that's star one one to ask the question. Please stand by for our next question. Our next question comes from the line of Winky Tan with Morningstar. Your line is open.
Hi. Good morning, Avi and Erin. Just a very quick one from me. Would you be able to share your interest coverage ratio as of December 31st?
Yeah, sure. Hi, Winky. I see I was sitting at about 2.9 times at 31 December.
Good. That's all from me. Thank you.
Please stand by for our next question. Our next question comes from the line of Peter Davidson with Pendal. Your line is open.
Hi, Erin, and hi, Avi. Just a quick question on this Coles West at Truganina. Is that an Ocado facility, or the previous one was Ocado? What's the purpose of that Coles DC? Is it to home, or is it to shops?
Yeah. No, it's not Ocado. This one's to shops, so it services their network, their main Victorian distribution center. But it will be fully automated, that type of structure like the current breed of DCs.
Yep. Okay. Thanks. The second one, Avi, I just noticed your comments about BP nominating a couple of service station sites that they were quite happy to sell. The question is, do you go through them yourselves as well with a sort of fine-tooth comb just to find whether there's a few assets you could sell perhaps well above book and just incrementally increase returns to it?
So will the. Yeah. The way it works, Pete, and you may have noticed in our results, there's usually every results period, there's a couple of small assets that we announce that we've sold. And the way that works is BP, given if we're in a joint venture with them, they'll come to us and identify assets that they believe are non-core of the portfolio that the joint venture wants to sell, and we do that. And we're made whole, so we're not left with but we're very happy with the portfolio, and we're happy with the WALE. And so long as BP's happy with the sites, then we continue to own them long-term. And the ones that they want to cull, we're happy to participate along with them. And as part of the deal, we're no worse off.
Same question again for the Endeavour relationship, the old ALE portfolio. I mean, do you go through that portfolio and identify sites? Because a lot of that's supported by bottle shop sales, but bottle shop sales are more difficult now than they used to be. It's a weaker market than it used to be. So do you go through and identify potential sites there, which you might be able to perhaps realize, make the portfolio a bit smaller, increase the returns, sell above book value?
Yeah. I mean, we have done. As just reported today, there was one asset where we received an offer well above book and decided to sell, and that happens from time to time. We're more than happy to look at that. And yeah, we're happy to, but otherwise, longer term, we think there's a lot of value in the portfolio. Unless we get an offer well above book, then we want to own these assets and continue to benefit and enjoy the strong rental growth and the growth in underlying land value. And particularly in the case of the ALE portfolio, we've got a big rent reversion coming, so we're not really inclined to want to give that away. So we just keep working towards that.
Okay. And then just last one for Erin. Is there any opportunity for margins to come down, Erin, in this portfolio? I know that rate's going up in the background, and we've probably got a couple of rate hikes coming. But what about the margin, the margin outlook?
Yeah, sure. Hi, Peter. So credit spreads are at cyclical lows, and the bank and loan markets do remain highly constructive with strong support received for assets like CLW's portfolio. The Charter Hall team, I think, as Avi mentioned earlier, are very active in driving these refinancing opportunities to try and capture some of the favorable margins in the current environment. So yes, that's definitely a priority.
Right. And what sort of savings might you capture? Say you captured 20 points. So a 20-point lower margin, how would that sort of play out in terms of borrow costs? Is it all in one year, or can it be staggered over time? Or how do people factor that in?
Well, if we were able to renegotiate debt facilities, typically, that would become applicable straightaway. So yeah, if we did the whole AUD 2.5 billion of debt and renegotiated it all in the next few months, then yes, you could realize that the way you're looking at it is correct. But it just depends how quickly we can work through the book and renegotiate facilities.
Yeah. And that's really the question, Avi, is just how would it actually play out within the portfolio? You might do it piece by piece as each fund matures?
Correct. I mean, we've just done ALE, and that was a favorable outcome. And we'll continue to work with our treasury team to look across the portfolio and identify opportunities for further savings.
Okay. All right. That's good. Thank you.
Thank you. Please stand by for our next question. We have a follow-up question from the line of Ben Brayshaw with Barrenjoey. Your line is open.
Avi, thanks for taking my follow-up question. Just wanted to go back to our discussion earlier on the Coles DC in Truganina. The book value in the presentation, just going back and checked it, June was AUD 75.9 million versus the transaction price in the accounts of AUD 71.4 million. So I just wanted to clarify. I think you indicated that the transaction went through at book, but just by way of that comparison, it would appear to be about 6% below.
Below June book, not December book.
That's right. Below June book.
Yeah. But I'm saying that that was the valuation at the time the transaction was undertaken. So that valuation, stale being almost eight months old, so the most recent valuation that was done on the property was the price at which the transaction occurred.
Okay. So you marked it down. Okay. Thanks.
Yeah. We've got value down. Yeah. Because as the WALE comes down on that asset, the valuation was impacted, and there was a bit of cap rate movement as well.
Got it.
Thank you. Ladies and gentlemen, I'm sure I know further questions in the queue. I would now like to turn the call back over to Avi for closing remarks.
Thanks, everyone. Appreciate your time today and for joining the call, and we look forward to catching up with you in one-on-one meetings in the coming days and weeks. Thank you.