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Charter Hall Transaction Update

15/07/2013

Charter Hall Group (ASX:CHC) (Charter Hall, CHC or the Group) provides the following transaction update for the Group and its managed funds.

WHOLESALE FUNDS AND PARTNERSHIPS

The Group's Wholesale Partnership and Wholesale Pooled Fund divisions have been actively deploying equity raised with the following acquisitions.

Core Plus Industrial Fund (CPIF) - 11.2% co-investment stake held by CHC (post recently announced $126 million equity raising in which CHC did not invest).

The Charter Hall managed CPIF has settled the acquisition of a $16.2 million industrial property at Huntingwood Drive Huntingwood, a prime industrial precinct in Sydney's western suburbs. The transaction is subject to a 10 year lease to Home Timber and Hardware. The lease is guaranteed by Woolworths Ltd and reflects a core capitalisation rate of 7.9% with 3.25% p.a. rent increases. Further expansion potential exists within the site.

Core Logistics Partnership (CLP) - 5.5% co-investment stake held by CHC

The Charter Hall managed CLP has exchanged and settled the following acquisitions:

  • A new 47,000 square metre industrial facility at Truganina, a prime industrial precinct within Melbourne's western suburbs. Stage 1 has been settled for $24.5 million, which comprises a gross lettable area of 22,170 square metres and is 100% leased to Fastline Pty Ltd for 10 years, an existing tenant within the CPIF portfolio. Stage 2, representing an adjacent freestanding subdivisible warehouse of 24,662 square metres, is subject to a five year rent guarantee from the project's developer, Australand Ltd and will be funded by CLP with completion expected in the September quarter. The total expected cost of $41.7 million for both Stages 1 & 2 is expected to provide an initial yield of 8.0% to 8.25%, dependant on the lease terms secured for Stage 2. Both the Fastline lease and Australand rent guarantees are subject to 3.5% pa rental increases. 
  • A $5.87 million industrial site in Mackay Queensland which is subject to a 15 year pre-lease to Blackwoods Pty Ltd, a wholly owned subsidiary of Wesfarmers Ltd. The projected completion cost of $24.4 million will provide an initial yield of 8.5% with 3.25% per annum rent increases. CIP, which is 50% owned by CHC, is the developer responsible for delivery of the project, having secured the site and the Blackwoods pre-lease. 
  • A $17.5 million site in the Brisbane suburb of Darra, acquired from Boral Ltd. CIP sourced the transaction and will act as developer under a Development Management agreement for seven years. The 28 hectare site has potential to develop circa 140,000 square metres of industrial space, subject to appropriate planning approvals.

On completion of all the contracted new building projects mentioned above, CLP will have a total portfolio value of $233 million excluding further expansion potential at the Darra estate. CLP's leased portfolio weighted average lease expiry is currently 12.8 years, with rent reviews averaging 3.0% per annum.

Charter Hall will continue to seek well leased quality industrial assets to invest the remaining capital committed by the CLP partners.

Acquisition of a seed asset for a new retail partnership

Charter Hall, in partnership with an institutional investor, has acquired the GWSC Shopping Centre in the Brisbane suburb of Keperra for $62.9 million, reflecting a 7.75% capitalisation rate.

The GWSC Centre comprises 17,000 square metre of lettable area, anchored by Woolworths and Aldi supermarkets and is situated on a 65,000 square metre corner site with expansion potential. The Centre adjoins a site owned by Bunnings Limited. The asset will be held within a newly established unlisted wholesale trust in which Charter Hall will initially hold a $22 million investment. It is likely that an additional wholesale partner will be secured for the partnership, which would see Charter Hall's co- investment either repatriated or remain invested as a minority investor in an enlarged retail partnership. The earnings yield on the $22 million Group investment is expected to exceed 8% p.a.

Direct Retail Fund (DRF) - 100% owned by CHC

As announced by Charter Hall Retail REIT (ASX:CQR) today, the Charter Hall owned and managed Direct Retail Fund (DRF) and its 50% co-owner CQR, have settled the sale of Home HQ Nunawading for $48 million to a private investor in line with the 30 June 2013 independent valuation which reflected a market equivalent cap rate of 10.7%. After the repayment of property debt and transaction costs, the transaction will result in the immediate realization of $10 million of net equity to each of DRF (Charter Hall) and CQR.

RETAIL INVESTOR FUNDS

Charter Hall Direct has been actively divesting assets in funds identified for wind-up returning capital to investors, including Charter Hall.

Charter Hall Diversified Property Fund (DPF) - 20% co-investment stake held by CHC

DPF has sold 53 Berry Street, North Sydney for $19.75 million to a syndicator with net proceeds of $10 million now received and available for distribution to DPF investors. The remaining two assets within DPF are being marketed for sale.

CHIF4 - Nil Charter Hall co-investment stake held by CHC

CHIF4 has sold its sole remaining asset, the Bushells Building located in Harrington Street, Sydney for a net price of $40 million and has returned $22 million of equity to CHIF4 investors. CHC Earnings Comment These transactions combined are not expected to have a material impact on CHC earnings in FY14.

For further information, please contact:

David Harrison
Joint Managing Director
T: +61 8908 4033
david.harrison@charterhall.com.au
David Southon
Joint Managing Director
T: +61 8908 4025
david.southon@charterhall.com.au
Investor enquiries:

Kylie Ramsden
Head of Listed Investor Relations
Charter Hall
T: +61 2 8295 1016
kylie.ramsden@charterhall.com.au
Media enquiries:

Rachel Mornington-West
Head of Marketing and Communications
Charter Hall
T: +61 2 8908 4093
rachel.mornington-west@charterhall.com.au

About the Charter Hall Group:

Charter Hall Group (ASX:CHC) is one of Australia's leading fully integrated property groups, with over 22 years' experience managing high quality property on behalf of institutional, wholesale and retail clients. Charter Hall has circa $10 billion of funds under management across the office, retail, industrial and residential sectors. The Group has offices in Sydney, Melbourne, Brisbane, Adelaide and Perth.

The Group's success is underpinned by a highly skilled and motivated team with diverse expertise across property sectors and risk-return profiles. Sustainability is a key element of its business approach and by ensuring its actions are commercially sound and make a difference to its people, customers and the environment, Charter Hall can make a positive impact for its investors, the community and the Group.

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