This article is from the Australian Property Journal archive
Charter Hall has caught the market by surprise by purchasing 333 George Street, Sydney for $69 million, for its Core Plus Office Fund and at the same time announced it has raised $435 million.
The $435 million capital raising from wholesale investors is the first major milestone for the Core Plus Office Fund. It is possible Charter Hall will raise up to $600 million for the fund.
The acquisition is the second asset for CPOF. CHC bought the Atrium at 60 Union Street, Pyrmont for $137 million in December 2005.
The purchase price of $69 million for 333 George Street represents a yield of 7%. CPOF has also received a $2 million rental guarantee from the vendor providing income support for future rental voids during a two year period post-settlement on July 04, 2006.
333 George Street is a B-Grade office building located within 100 metres of Wynyard Railway Station opposite Martin Place.
The 13 storey building has 9,882 sqm of space including 16 car spaces and is currently 100% occupied by income across 26 tenancies with major tenants including JM Ryans Hotels Pty Ltd and State Super.
The property underwent a major refurbishment in 2003.
Charter Hall’s joint chief executive David Harrison said the property offers diversification in terms of rental income with over 37% of income being derived from retail shops.
He added that the current passing rents are below market at $405 per sqm allowing for short term rental reversions.
Charter Hall said further equity commitments have been submitted as expressions of interest, which are likely to be finalised by mid August 2006.
The group said if current expressions of interest are finalised within the second close, CPOF is expected to exceed the previously nominated target of $500 million, adding that, the fund has scope to increase its size to a maximum of $600 million.
CPOF was launched in December 2005. The open ended property fund has a seven year review. CPOF’s initial asset capacity stands at $870 million and a target portfolio of $1 billion.
In addition, Charter Hall has committed to a minimum investment of $100 million in CPOF or a 20% co-investment model with the Charter Hall Property Trust.
The Atrium and 333 George Street purchase will have a combined asset value $206 million and the drawn equity investment by Charter Hall Property Trust is expected to be $27 million.
“This is a significant vote of confidence from wholesale investors who recognise the group’s past performance and value add credentials, access to deal flow primarily sourced off market, risk management processes and corporate governance,” Harrison said.
Charter Hall currently manage four opportunity funds that have raised $434 million of equity and undertaken over $1 billion worth of projects, with the capacity for a further $500 million of projects in its latest opportunity fund.
Brookvine advised Charter Hall with the CPOF raising.
Charter Hall shares closed 3.01% or 4 cents lower at $1.29 yesterday.
By Nelson Yap
