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Charter Hall Group (ASX:CHC) (Charter Hall or the Charter Hall Group) today announced it has launched a new unlisted retail property trust, the Charter Hall Direct Automotive Trust (DAT), and is seeking to raise $55 million in equity to acquire three properties in Sydney, NSW and Brisbane, Qld (the Portfolio).
Targeting retail, high net worth and self managed superannuation fund (SMSF) investors, DAT has an initial six year term and is targeting an initial distribution income return of 7.5% for years one and two and forecast to increase over the life of the trust.
The Portfolio is 100% leased to Automotive Holdings Group Limited (ASX:AHG), a diversified automotive retailing and logistics group with operations in every Australian mainland state and New Zealand. The largest Australian automotive retailer by sales, profitability and workforce, AHG distributes 23 passenger vehicle brands, including nine of the top 10 mainstream brands in Australia. With car sales exceeding 100,000 per annum, AHG has 175 franchises at 101 dealership locations in Australia and more than 7,500 employees.
The Portfolio is 100% leased to AHG with average annual lease increases of between 3% and 4% per annum. The trust’s Sydney properties operate well established Holden, Hyundai, Nissan and Mazda dealerships, with the Queensland property to operate as a Mazda dealership once completed. The four brands at the dealerships are all in the top 10 passenger brands in Australia by volume.
Richard Stacker, Head of Charter Hall’s Direct Property business explained that the Direct Property business continues to grow in popularity with investors, particularly SMSFs.
“Our capabilities to access, deploy, manage and invest capital means that we are able to create industry leading property investment funds that provide our investors with stable income streams. The Direct business has a strong track record of identifying new high quality investment products that offer investors access to quality long leased assets with strong tenant covenants in growing markets. DAT is another example of our ability to create new funds that have the potential to deliver strong returns to investors".
“DAT’s exposure to a quality portfolio and strong covenant on long term leases resonates with investors. The trust has an occupancy level of 100%, a weighted average lease expiry (WALE) of 13 years and income generated from leases to a leading ASX 200 business. The trust will be conservatively geared at no more than 49% and provide investors with the added benefit of tax- advantaged income,” Mr Stacker added.
AHG managing director Bronte Howson said, “The transaction is part of our normal capital management strategy to maintain capacity in our balance sheet to fund growth opportunities. It creates a partnership between AHG and Charter Hall, an institutional property manager who provides the scale and access to equity, which allows us to look at future opportunities across our automotive dealership and logistics businesses.”
Charter Hall’s Direct Property business has a solid record of delivering attractive returns for investors. The latest IPD benchmark results showed Charter Hall’s unlisted retail funds and syndicates held five out of the top 10 positions for performance in the 12 months to 30 June 2015.
Steven Bennett, Fund Manager for Charter Hall’s Direct business said, “Our team has a strong track record of identifying new high quality investment products that offer investors access to quality long leased assets with strong tenant covenants that deliver solid risk adjusted returns. We will continue to explore opportunities for funds that have the potential to deliver strong returns to investors.”
The DAT offer opens on 18 August 2015. The equity raising is limited to $55 million and income distributions will be paid monthly.