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Telstra reaches $1 billion in asset monetisation after Charter Hall deal

James Mickleboro
Businessman paying Australian money

The Telstra Corporation Ltd (ASX: TLS) share price will be one to watch this morning after revealing that its asset monetisation has reached $1 billion.

What did Telstra announce?

This morning Telstra announced the establishment and part sale of an unlisted property trust that will own 37 of its existing exchange properties.

According to the release, as part of the transaction, a consortium led by Charter Hall Group (ASX: CHC) will acquire a 49% stake in the new trust for $700 million. This reflects a capitalisation rate of 4.4% and values the entire property trust at $1.43 billion.

Telstra will retain ownership of a 51% controlling interest in the property trust and retain operational control of the properties. It intends to sign long-term triple-net lease arrangements with the property trust, providing it with a stable flow of payments.

These leases will have a weighted average lease expiry of 21 years, with multiple options for lease extension to accommodate the business’ ongoing requirements

Telstra’s CEO, Andrew Penn, believes the agreement demonstrates further progress in relation to the fourth pillar of its T22 strategy – monetising up to $2 billion of assets to strengthen its balance sheet.

He said: “When we announced our T22 strategy in June 2018 it included the goal of monetising up to $2 billion of assets to strengthen our balance sheet. Since then we have been working to unlock the true value of some of our assets and today’s agreement, when completed, will take us to around the $1 billion mark.”

This follows an agreement announced on Thursday to sell part of its portfolio of data centres in Europe and Asia to global private equity firm I-Squared Capital, owners of HGC Global Communications.

That agreement remains subject to a number of conditions precedent, but if these are satisfied Telstra expects the transaction to be completed in first half of FY 2020. The estimated proceeds from the sale are approximately $160 million, which are included in the $1 billion figure mentioned by Mr Penn.

Charter Hall’s managing director and Group CEO, David Harrison, said: “The creation of this Partnership continues Charter Hall’s successful growth of new partnerships and funds, whilst further extending the Group’s long WALE investment strategy. It also continues the strong relationship we have with Telstra, one of our significant tenant-customers and demonstrates Charter Hall’s leading position in the sale and leaseback market in Australia.”

Overall, I think this is another positive step forward for the company, which could make it a blue chip share to buy along with these top stocks.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019