Charter Hall Launches New Direct Retail Fund

Following its successful restructure of the wholesale Charter Hall Core Plus Retail Fund (‘CPRF'), Charter Hall Group (ASX:CHC) today announced it has launched the Charter Hall Direct Retail Fund (‘DRF'). DRF has been awarded Lonsec's second highest rating, ‘recommended upper end'. DRF will now form part of the Group's $1.5 billion portfolio within the Charter Hall Direct business.

DRF is an unlisted retail property fund targeting retail, high net worth and self managed superannuation fund investors.  The Fund has an initial seven year term and is targeting eight cents per unit annualised initial distribution. The Fund has an initial portfolio of six retail shopping centres located throughout New South Wales, Victoria, Queensland and New Zealand and will look to acquire further suitable investments to expand the diversified portfolio of quality sub-regional, neighbourhood and household retail shopping centres.

Charter Hall Group's Joint Managing Director, David Harrison, said: 'Through the successful restructure of CPRF, we are able to provide investors with immediate access to a $177 million retail portfolio with an occupancy level of 98.4%, a weighted average lease expiry (WALE) of 7.3 years and income generated from leases to over 100 high calibre tenants including Woolworths Supermarkets, Coles Supermarkets, Big W, Bunnings, JB Hi Fi, The Good Guys and Spotlight.'

The launch of DRF follows the strong investor interest in Charter Hall's Direct Industrial Fund (DIF), which has raised $42 million of equity since its launch in July 2010 which has been used to purchase three new industrial investments at an average initial yield exceeding 8.5%.  Charter Hall Group's initial underwriting has been sold down and the Fund has received strong interest from financial advisers as clients look for property investment products with strong yields and good growth prospects as the commercial property market moves into an expected upward cycle. 

Charter Hall Direct Property's Chief Executive Officer, Richard Stacker, said: 'Throughout the year we have seen strong interest from retail investors in direct property opportunities, particularly from self managed super funds.  With the improved outlook for the retail, office and industrial property markets, together with the particular tax advantages of direct investment, we expect this trend to continue.'

The restructured DRF (formerly CPRF) comprises $177 million in assets with gearing of 45%. DRF's restructured finance facilities have a duration of three years. Charter Hall Group currently has a 66% interest in DRF (circa $65 million equity investment) which it intends to sell down to circa 20% as part of the equity raising, potentially releasing circa $45 million from the Charter Hall Group co-investment portfolio.  Charter Hall Group currently consolidates DRF in its Group accounts given the Group's interest is greater than 50%.  Once circa $25 million has been raised for DRF Charter Hall Group will no longer consolidate DRF.

As part of the CPRF restructure Charter Hall Group has 100% economic ownership of two assets located in Mentone. One of these assets, the Mentone development site jointly owned with Harvey Norman, has been sold and settled for $44 million ($22 million 50% Charter Hall Group interest) with Charter Hall Group retaining ownership of the Mentone Showrooms investment (approximately
$18 million) pending sale negotiations.

Charter Hall Group (ASX:CHC) is a property funds management and development company, based in Sydney with offices in Melbourne, Brisbane, Perth, Adelaide, Warsaw and Chicago. Established in 1991 and listed on the ASX in 2005 as a stapled security under the code CHC, Charter Hall Group combines Charter Hall Limited with Charter Hall Property Trust, which owns and/or manages over $10 billion in real estate assets. The Charter Hall Group has achieved a solid track record across its activities demonstrating a 19 year history of managing wholesale and retail capital, making it one of Australia's leading property fund managers. Charter Hall's success has been underpinned by a highly skilled and motivated management team with diverse expertise across property sectors and risk-return profiles.

Important information

Charter Hall Direct Property Management Limited ('CHDPML') (ABN 56 073 623 784, AFSL 226849) in its capacity as responsible entity of Charter Hall Direct Retail Fund (DRF) has made this information available for general information purposes only without taking into account any potential investor's objectives, financial situation or needs.

CHDPML has issued a product disclosure statement dated 20 December 2010 ('PDS') which sets out full details of the offer to apply for units in DRF. If you are considering an investment in DRF you should read the PDS in its entirety and consider the information set out in relation to the offer, particularly the qualifications and assumptions in relation to the target distribution and the risks associated with investing in DRF. You can request a copy of the PDS, free of charge, by calling CHDPML on 1300 652 790.

© Charter Hall Group 2010

The Lonsec Limited ('Lonsec') ABN 56 061 751 102 rating (assigned July 2010) presented in this document is limited to 'General Advice' and based solely on consideration of the investment merits of the financial product(s). It is not a recommendation to purchase, sell or hold the relevant product(s), and you should seek independent financial advice before investing in this product(s). The rating is subject to change without notice and Lonsec assumes no obligation to update this document following publication. Lonsec receives a fee from the fund manager for rating the product(s) using comprehensive and objective criteria.