Charter Hall, Abacus start FY22 with $666 million in deals

Charter Hall Group and its entities have started the new financial year with a bang, announcing $531 million in acquisitions including a one-third share of the Myer Melbourne store and the biggest Brisbane office deal of 2021 so far.

In the Brisbane transaction, Charter Hall Prime Office Fund took full ownership of 275 George St, acquiring the 50 per cent it did not own from Singapore based Keppel REIT for $264 million at a capitalisation rate of 5 per cent.

As co-owner of the adjoining tower at 69 Ann St in partnership with Charter Hall’s Direct Office Fund, CPOF now controls 8000 square metres of prime Brisbane CBD real estate with three street frontages and 68,400 square metres in lettable space.

Consolidation is a core strategic goal of CPOF, said fund manager Matthew Brown.

“This acquisition is a continuation of CPOF’s tactical reweighting of the portfolio towards high-quality modern assets where we have the ability to create major CBD precincts.”

Keppel REIT made a $98 million gain on the deal, brokered by Seb Turnbull and Paul Noonan from JLL, after paying $166 million for its half-share of the 31-storey tower in 2010, its first investment in Australia where it still has interests in five buildings.

Paul Tham, chief executive of Keppel REIT, said the sale will “provide us with flexibility as we seek strategic and higher-yielding acquisitions”. Proceeds will initially be used to pay down debt, reducing its leverage to just under 38 per cent.

Charter Hall’s Long WALE REIT (CLW) also announced three acquisitions headlined by its purchase of 33.3 per cent of the Myer’s Bourke Street Mall property in central Melbourne for $135.2 million.

In a simultaneous transaction, ASX-listed Abacus Property Group bought 33.3 per cent of the iconic retail asset for the same amount on a passing yield of 6 per cent, reflecting the decline in retail asset values since the onset of COVID-19.

The vendors were Nuveen Real Estate and GIC. Property manager Vicinity Centres retains its one-third share, most recently valued at $142.5 million, down from the $492 million it was worth just over one year ago.

Combined, this is the largest CBD retail transaction in Australia of 2021 and the biggest in central Melbourne for 13 years. The 66.6 per cent share was taken to market by Lachlan MacGillivray from Colliers and JLL’s Sam Hatcher.

Myer Pty Ltd has a lease of 10.5 years on the nine-level property, which offers revenue enhancement and development opportunities, said Abacus managing director Steven Sewell.

“With the potential for a degree of repositioning, this is a great opportunity to implement active asset management plans and drive superior returns,” Mr Sewell said.

CLW fund manager Avi Anger said the Myer acquisition aligns with its holding in the David Jones department store in Castlereagh Street, Sydney.

“Together they represent two of Australia’s most iconic CBD buildings,” Mr Anger said.

CLW also announced the purchase of a Brisbane distribution centre leased to Simon National Carriers for $83.1 million, and 100 per cent of a Bunnings store on the southern fringes of Perth, which cost $49 million.

Combined, they will return a passing yield of 5.1 per cent with a weighted average lease expiry of 11.2 years.

“As a result, we have upgraded FY22 operating earnings per share guidance to growth of no less than 4.5 per cent over forecast,” Mr Anger said.


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