This article is from the Australian Property Journal archive
Property funds giant Charter Hall is optimistic the commercial real estate market is at an inflection point after a period of value corrections and has upgraded its guidance, and it is also confident its investment strategies are well-placed for Australia accommodating population growth the equivalent to the size of Brisbane and Adelaide over the next decade.
Full-year earnings guidance has been upgraded to 81c cents per security for post-tax operating earnings per security, up from 79c, representing 6.9% growth over FY24.
FY25 distribution per security guidance is for 6% growth over FY24.
Charter Hall reported interim operating earnings of $196.4 million, reflecting operating earnings per security post-tax of 41.5c. Statutory earnings post-tax was $61.1 million, and distributions per security was 23.4c.
Group funds under management (FUM) increased by $2.5 billion to $83.4 billion, consisting of $66.4 billion of property FUM whilst listed equities FUM at Paradice Investment Management has grown to $17 billion.
Charter Hall’s juggernaut portfolio has been hit hard by the value corrections of recent times, particularly in the office sector as employees worked from home during and in the fallout of the COVID pandemic, and through a sustained period of high interest rates.
Managing director and group CEO, David Harrison sees upside in the current state of play.
“We see current market pricing as offering attractive long-term returns for stabilised core real estate products and our investment strategies,” he said.
“It is our expectation that capital deployment will accelerate to take advantage of market conditions and typically accelerates further as the upward cycle gathers pace.”
The first half saw $1.6 billion in gross equity inflows, equivalent to the total gross equity raised for the 12 months in FY24. The half also saw acquisitions of $2.2 billion, significantly ahead of the $1.7 billion in acquisitions seen over the entirety of FY24.
“Our investment strategies are poised to deliver attractive growth in earnings and asset values which we expect to generate compelling IRRs for existing and new investment capital partners,” Harrison said.
Charter Hall is also eyeing off the opportunities that will be created by with strong forecast population growth.
“Looking 10 years ahead Australia is forecast to see its population grow by 3.9 million people. To accommodate this growth, Australia will need to build additional supply across all real estate sectors, the size of Brisbane and Adelaide combined to accommodate this population growth. Our tenant customers will need solutions to cater for this growth in the economy and our investor customers will see attractive investment opportunities,” Harrison said.
“We are clearly now at an inflection point in the market and as Australia’s largest owner and manager of commercial real estate, Charter Hall is well positioned to deliver for our investor and tenant customers as our nation and economy continues to grow.”
Knight Frank’s chief economist Ben Burston said this week’s long-awaited interest rate cut by the RBA signals a turning point for commercial property markets nationally, indicating that the devaluation cycle is ending and that we are turning the corner to a new growth cycle”.
Lake Macquarie Square sold off
Meanwhile, Charter Hall’s Retail REIT has offloaded Lake Macquarie Square shopping centre to developer Revelop for $122.5 million.
JLL’s Nick Willis and Sam Hatcher brokered the off-market deal.
Lake Macquarie Square is anchored by Woolworth, Coles and Big W, and has 69 specialty stores and a dining precinct.
Charter Hall Retail REIT undertook a $60 million project six years ago which combined Lake Macquarie Fair and Mount Hutton into a single asset. Moving annual turnover is now more than $160 million.
