Charter Hall Group (ASX:CHC) today announced that its Direct Office Fund (DOF) has now raised circa $175 million since its launch, as a broad range of investors see a compelling opportunity to invest in a high quality long WALE (weighted average lease expiry) office portfolio.
Head of Charter Hall Direct, Richard Stacker said: “Interest in DOF has been strong and we expect to close early in 2016. There has been a noticeable increase in interest from self managed super fund (SMSF) trustees in this low term deposit environment.”
“With the expectation that the Australian economy is likely to be in a low interest rate environment for some time, three year term deposits at 3% and the ASX 200 Dividend Yield at 4.5%, interest in direct property, which is providing year one income yields of 7.0% or more generated from conservatively geared, strong tenant covenant investments, are attracting strong flows,” Mr Stacker said.
“The great advantage is the investor enjoys quarterly income more than double term deposit rates and does not have to worry about where to reinvest for five years. It’s a story we are hearing directly from investors and financial advisers alike,” Mr Stacker added.
DOF recently secured another major asset in Brisbane in a 50/50 partnership with the Charter Hall Core Plus Office Fund (CPOF), following on from a successful joint venture in Parramatta leased for 15 years to Western Sydney University. The fund has purchased the site at 900 Ann Street, Fortitude Valley on Brisbane’s fringe for a new 19,000sm office tower which is pre-leased to the ASX-listed Aurizon on an initial 12-year lease.
Aurizon, formerly Queensland Rail, selected the Fortitude Valley site following an extensive market search for new office accommodation, partnering with Brisbane based Consolidated Properties Group (CPG) as its development partner. CPG has partnered with CPOF and DOF for the development management and funding of the property, and Hutchinson has been appointed as the builder under a Design and Construct contract.
Steven Bennett, DOF’s Fund Manager, said the transaction will have the effect of extending the already industry leading WALE of DOF to 9.4 years and will have a positive impact on DOF’s key portfolio metrics, including weighted average building age and weighted average capitalisation rate.
“DOF remains strategically weighted to the Sydney and Melbourne office markets which have the best medium term outlook and employment growth of all Australian states. The addition of 900 Ann Street provides geographic diversification secured by a quality tenant on a long term lease, also positioning the fund to deliver strong returns for investors.”
DOF’s property portfolio is now valued at $675 million, of the targeted $800 million.
Earlier this month DOF was awarded the 2015 Wealth and Finance Fund Awards for Best Unlisted Property Fund. These awards recognise innovative work taking place across the worldwide fund industry by managers who implement exceptional strategies and gain spectacular results for their clients.
This follows the recent recognition of Charter Hall’s Direct Property business as the Best Commercial Property Fund Manager by SMSF members at the prestigious CoreData Self-Managed Super Fund (SMSF) Service Provider Awards.
The Direct Property business has delivered attractive returns for investors and has been very active over the past five years with a 15.5% annual total return (ordinary units) to 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 September 2015.
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