Charter Hall Direct PFA Fund enhances portfolio with $275 million of high quality CBD office assets

From
Steven Bennett

Steven Bennett

Charter Hall’s $4.5 billion Direct Property business, announced that its PFA Fund (PFA) has acquired a 100% interest in a high-quality and well-located office asset in the Melbourne CBD for $192 million (less outstanding tenant incentives).

The acquisition follows the 100% Freehold interest in 121 King William Street, Adelaide, for a total consideration of $82.25 million along with the Sydney CBD acquisition of the AMEX leased (9.5-year WALE) 12 Shelley Street office tower in late 2018.

The property, located at 737 Bourke Street, represents a large freehold land holding in close proximity to Southern Cross Station. Completed in 2008, the modern A-Grade office building comprises 18,500sqm of NLA, split between ground floor retail and eight levels of office accommodation, with large flexible floor plates of approximately 2,088 sqm benefitting from 4 elevations of natural light on a prominent corner location.

The Property is 98% occupied by well-recognised corporations and government tenants including Lion Dairy and Drinks, owned by the global Kirin Holdings, Symbion Health and the Victorian Building Authority, combined providing a 5.5 year weighted average lease expiry (WALE) and attractive average rent reviews of 3.7% per annum.

The Docklands Precinct is reaching capacity with limited future supply opportunities and high tenant demand resulting in historically low vacancy rates. The Docklands prime vacancy rate was 0.7% as at Q4 2018, which could lead to continued strong Melbourne effective market rental growth.

The PFA fund, valued at $966 million, owns fourteen office buildings in capital city markets across six states and the ACT. The fund provides monthly tax-advantaged distributions, an occupancy rate of 99%, a high proportion of government tenants – 54%, and an attractive WALE of 7.5 years. The fund is open for investment and continues to receive strong equity inflows throughout 2019.

Head of Charter Hall Direct, Steven Bennett, said the acquisitions are consistent with the funds strategy and represent its first assets in both the strong performing Melbourne CBD and improving Adelaide CBD office markets.

“These acquisitions reflect strategic investments in the core Melbourne and Adelaide office markets which are continuing to experience strong tenant demand and effective rental growth. The relatively new properties are strategically located, multi-tenanted and further improves the PFA portfolio quality.”

PFA provides an opportunity for investors and SMSF trustees and members to acquire an interest in high quality buildings in major Australian office markets leased to excellent tenants on long term leases.

“This formula translates into an attractive current distribution yield of 6.7%pa[1], paid monthly with potential for capital growth.

“These numbers compare very favourably to current interest rates available on cash and term deposits.”

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[1] PFA’s yield based on forecast distribution of 7.25 cents per unit over the forecast period being 1 July 2018 to 30 June 2019 (annualised), and $1.06 unit price (Ordinary Units) at 1 April 2019.

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