Charter Hall Shares Climb on News of $122.5 Million Healthcare Acquisition

Charter Hall Shares Climb on News of $122.5 Million Healthcare Acquisition

Today the RBA released its latest financial stability review. A detailed report looking at the state of Australia’s economy, and what lies in store.

Needless to say, the focus was centred on the pandemic and our path to recovery.

And while Australia, along with the rest of the global economy, has taken a big hit — there are still positives. Banks and markets, for example, were standouts for the RBA, having endured the initial shock.

Moving forward, though, the stress will now move to other sectors, with commercial real estate being labelled as posing ‘significant risks for lenders and leveraged investors.

But the one caveat from the RBA is that demand for industrial property is strong, which is a fantastic sign for companies like Charter Hall Social Infrastructure REIT [ASX:CQE]. A stock that has just announced another new acquisition.

Healthy diversification

Charter Hall has officially made a $122.5 million purchase of a Queensland healthcare hub, snapping up a key sales and leaseback deal with Mater Misericordiae Ltd. The largest Catholic, not-for-profit health provider in the state.

With a 10-year lease and two possible five-year extensions, it’s a long-term deal, too. Terms that are bound to please shareholders.

Plus, the building itself is still being built, with completion expected sometime within the June quarter of 2021. So, it is likely to be state of the art – or, at the very least, brand new when finished.

This helped lift the company’s share price by 1.6% at time of writing. A modest lift for a relatively subdued day on the ASX.

But that didn’t stop Charter Hall’s CEO from beaming over the deal:

We are excited about establishing a relationship with Mater as a major tenant customer within our growing Social Infrastructure portfolio, further reinforcing our commitment to grow our reach with major providers of Social Infrastructure services.

Furthermore, it will bump up CQE’s non-childcare asset income from 4% to 11%. A sizeable lift, and one that may signal a turning point for the company.

For investors, it is definitely something to keep a close eye on.

What next for CQE?

It is hard to gauge what will come next for CQE, and the broader REIT sector for that matter.

Commercial property in particular still has some major question marks surrounding it, with the RBA’s assessment and concern certainly lingering in many people’s minds.

Expect to see plenty of financial struggles, bankruptcies and more in the coming weeks and months. All of which will place pressure on property and leases.

Fortunately, CQE has a little more resilience than most, thanks to its infrastructure focus. Whether that will be enough to insulate it completely, though, remains to be seen.

Right now, however, it’s certainly doing better than most.

For more info on the state of Australia’s property market, check out our full report, which contains a detailed analysis of what has happened and what may come next.

You can read the full report, for free, right here.


Ryan Clarkson-Ledward,
For The Daily Reckoning Australia