Charter Hall’s Direct Office Fund to grow to $1.2 billion with new equity raising

Nick Kelly

Charter Hall Group (the Group) has announced its market leading unlisted Direct Office Fund (DOF) has launched a new round of equity raising with the ability to accept a further $250 million from investors.

DOF is an unlisted property fund investing in a diversified and growing portfolio of high quality Australian office properties. DOF currently comprises nine fully leased office buildings in Sydney, Melbourne, Brisbane and Perth valued at over $842 million.

DOF aims to provide investors with sustainable and stable, tax advantaged income and the potential for capital growth. The current distribution yield for the fund is 6.6%1 per annum, an attractive offer in an environment with lower prospective income returns from other asset classes, particularly cash, fixed interest and bonds.

“Following strong investor demand and Charter Hall’s ability to access a pipeline of high quality, well located Australian office property, the fund is targeting to grow its property portfolio to over $1.2 billion,” said Steven Bennett, Fund Manager of DOF.

DOF achieved a total return of 20.1% per annum in the 12 months to June 30, 2016. This compares to the benchmark (MSCI/IPD Australian Unlisted Wholesale Property Fund Index) return of 12.8% over the same period.

“DOF has provided investors with annualised distributions of 7.5 cents per unit paid quarterly plus strong capital growth to date, which is forecast to grow to an annualised 7.75 cents per unit for the year ending 30 June 2017.

The DOF portfolio has a 100% occupancy rate, which is substantially above the Property Council of Australia’s occupancy benchmark and a 9.2 year weighted average lease expiry (WALE), which is the highest in the sector.

Additionally, the Fund has been strategically weighted to the Sydney and Melbourne office markets which are forecast to have the highest growth rates and which comprise over 70% of the Funds’ assets by value.

Nick Kelly, Head of Direct said: “DOF is a flagship fund for the Charter Hall Direct business. Its key characteristics of long average lease terms, investment in strategic markets with a strong weighting to the Sydney and Melbourne, conservative gearing and high quality tenants, is representative of the Charter Hall approach to property investing.”