Charter Hall Direct Property launches New Fund as Business Reports Improving Conditions

• New industrial property fund targeting 8.7% pa yield for initial investors responds to market demand
• Charter Hall Direct Property Fund expected to re-open by year end
• 24% of financial planners expect to increase allocation to property

One of Australia's largest unlisted property fund managers, Charter Hall Direct Property, today announced the launch of its new closed-end industrial property fund as the business reports improving conditions and growing demand for high quality property in Australia. Charter Hall is looking to raise $30 million before 30 September 2010 for the Charter Hall Direct Industrial Fund (DIF or Fund), which has been awarded a ‘highly recommended' rating by Lonsec. 

Charter Hall Direct Property Chief Executive Officer, Richard Stacker, said the new Fund is well positioned to capture growing market demand.

'The market continues to be attracted to the low volatility and stable income unlisted property provides.  While we are continuing to see strong interest in quality property investments, investors are looking for defined investment mandates, conservative gearing and certainty around exit mechanisms,' he said.

DIF is a closed-end fund with tight investment criteria, targeting an 8.7% pa yield for initial investors.  The Fund will invest in new, prime grade industrial properties that are well-positioned next to major transport routes.  Assets under development will also be purchased where approvals are in place and leases have been committed. 

The Fund will commence with an initial asset, located in Altona North, Melbourne, 100% leased to Toll Holdings and valued at $24.4 million.  Charter Hall acquired the prime-grade property for $23.2 million from CIP, an industrial developer. Charter Hall has a long-standing commercial relationship with CIP, and in June 2007 acquired a 50% ownership interest in the company. The Altona North asset is the first of up to $200 million of prime industrial property the Fund is targeting that will be acquired both on and off market.

Initial investors will receive an additional 0.5 cents per unit distribution for the first two years.  Investors are expected to be able to access funds at the end of the seven year period with the potential for earlier return of capital if assets are sold earlier.

Recent findings of a survey of 700 financial advisers conducted for Charter Hall by Rainmaker supports expectations for strong demand.  Close to one in four (24%) financial advisers indicated they plan to increase their clients' allocation to property with a preference for Australian property indicated by 51% of respondents.

As one of the few managers currently raising equity, Mr Stacker said DIF presented an opportunity for investors to invest in prime assets at the bottom of the cycle. 

'Many commentators suggest we've come through the worst of the recent cycle and savvy investors will see that now is the time to invest to capture rising property values and rental growth,' he said.

The Fund is now open for investment with a $10,000 minimum investment.

Manager's willingness to take action during the cycle has delivered for investors

Commenting on the property market, Richard Stacker believes that DIF reflects a number of lessons learned during the recent cycle. 

'The recent cycle demonstrated unlisted property should be viewed as a long term investment with limited or no liquidity but with much lower volatility than other asset classes. We learnt gearing levels should be adjusted during the cycle.  While a 45% gearing level at the bottom of the cycle is appropriate, this needs to be reduced as asset values and property fundamentals change through the cycle,' he said.

Mr Stacker said Charter Hall Direct Property took decisive action during the crisis as property values fell and gearing levels rose. 

'In many ways the test of a manager is how you handle the difficult times.  Our ability to selectively sell assets to repay debt and retain a low gearing range helped support the unit price and maintain distributions in our largest fund while positioning us well for the future,' he added.

Throughout 2008 and 2009, the manager sold assets in the Charter Hall Direct Property Fund (CHDPF, formerly the Macquarie Direct Property Fund) to repay A$270 million in debt and maintain gearing at the lower end of the target range of 40 to 55%.  CHDPF's gearing at 30 June 2010 was 46%. CHDPF's unit price stabilised in July 2009 and distributions continued to be paid throughout the cycle.  The manager expects to reopen the fund in the fourth quarter of 2010.

Despite the recent market challenges, Mr Stacker said interest from financial advisers and investors in quality unlisted property investments remain, particularly among self managed super funds (SMSFs). The manager's recent equity raising success reflects strong demand with $85 million raised in nine months for the Macquarie Martin Place Trust and 130 Stirling Street Trust. 

ENDS

Charter Hall Direct Property is one of Australia's leading unlisted property fund managers, with approximately $1.2 billion of real estate assets across the commercial, retail and industrial sectors under management as at 30 June 2010. Charter Hall Direct Property, part of Charter Hall Group, has a strong track record, managing unlisted property funds and syndicates on behalf of investors for more than 10 years.

Charter Hall Group is a leading specialist property funds management and development company, with assets under management in excess of $10 billion across wholesale, listed and unlisted equity sources.

Disclaimer

Units in the Charter Hall Direct Industrial Fund ('DIF') are made available by Charter Hall Direct Property Management Limited (ACN 56 073 623 784, AFSL 226849) ('CHDPML') under a Product Disclosure Statement ('PDS').  Potential investors should consider the PDS before making any decisions regarding the offer.  Copies of the PDS can be obtained from CHDPML by calling 1300 652 790 or www.charterhall.com.au/dif

This announcement has been prepared without taking into account any particular potential investor's objectives, financial situation or needs. Before investing, CHDPML recommends that you consider whether it is appropriate for your circumstances having regard to your own objectives, financial situation and needs.  The DIF offer is not open to persons in any jurisdiction in which an offer, invitation, solicitation or inducement for the issue, sale or purchase of any DIF units would be contrary to local laws or regulations.

CHDPML does not receive fees in respect of the general financial product advice it may provide, however it will receive fees for operating DIF which, in accordance with the DIF Constitution, are calculated by reference to the value of the assets of and performance of DIF.  Entities within the Charter Hall Group may receive fees for managing the assets of, and providing resources to DIF. For more detail on fees, see the PDS.