CPOF raises $435m equity and acquires Sydney CBD asset

Charter Hall Group announces that as at the first close of the Core Plus Office Fund

(CPOF) capital raising, $435 million of equity commitments from wholesale investors
have been received. Further equity commitments have been submitted as Expressions of Interest, which are likely to be finalised by the second close date, anticipated to be mid August 2006. 

If current Expressions of Interest are finalised within the second close, CPOF is expected to exceed the previously nominated target of $500 million, as the CPOF Information Memorandum provides scope to increase the fund size to a maximum of $600 million should investor demand warrant such.

In addition, Charter Hall announces that CPOF has contracted to acquire its second
asset, being 333 George Street, Sydney for $69 million. This price is inclusive of a $2 million rental guarantee from the vendor providing income support for future rental voids during a 2 year period post-settlement on 4 July 2006. An overview of this transaction is outlined below.

The seed asset for the fund is Sydney commercial property known as %u2018Atrium', located at 60 Union Street, Pyrmont, which has long term lease commitments to American Express International Inc and Coles Supermarkets for 12 & 20 years respectively from completion in September 2006. This asset was acquired from a Charter Hall Group managed opportunity fund for $137 million. 

Charter Hall's Joint CEO, David Harrison, noted "the successful CPOF capital raising demonstrates the strength of Charter Hall's relationship with wholesale investors who support the 20% co-investment model with the Charter Hall Property Trust, adopted by the Group. 

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".

Other wholesale funds managed by Charter Hall include 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.
CPOF was launched in December 2005. 

Through its equity commitment of $100 million to the fund, Charter Hall Property Trust will generate its growth in office sector assets via its investment in CPOF. As with previous wholesale funds, equity commitments are drawn down from investors progressively as acquisitions are finalised, following approval by the CPOF Investment Committee. With gearing of up to 50% of total fund assets, CPOF assets have initial capacity of approximately $870 million.

The investment strategy of CPOF is to acquire and hold office properties over the
medium to long term within a "Flow through" investment trust :
– that are located within capital city markets of Australia, primarily CBD and Fringe
CBD precincts, however, suburban or metropolitan locations may be considered
appropriate;
– that may require enhancement and represent appropriate investment grade assets
to be held in a flow through wholesale funds which distributes 100% of pre-tax net
rental income;
– where values post-enhancement will generally be in the price range of $50 million to $250 million;
– to provide a mix of core (70%) and enhanced (30%) assets:
The combined asset value of the initial two assets within CPOF total $206 million and the drawn equity investment by Charter Hall Property Trust in CPOF as at 30 June 2006 is expected to be $27 million.

Brookvine advised Charter Hall with the CPOF raising.