Steven Bennett

Charter Hall Direct’s Industrial Fund No.4 (DIF4) has announced the acquisition of two food manufacturing facilities on a 30-year sale and leaseback to leading food business Patties Foods for $141 million.

The sale and leaseback arrangement with Patties Foods provides for a 30-year triple net lease with fixed 3% annual reviews. The Portfolio consists of two properties including the world class bakery in Bairnsdale and fast growing ready meals facility in Pakenham, Victoria, with a combined site area of 27.2 hectares. The improvements comprise 46,175sqm of GLA (17% site coverage) including 41,478sqm of warehouse and total office area of 4,697sqm (10.2%) across both sites.

Patties Foods Group is one of the largest pie manufacturers in the world, producing some of Australia’s most iconic, market leading brands, including Four’N Twenty, Patties, Herbert Adams, Boscastle, Nanna’s, Ruffie Rustic Foods and Fitness Outcomes, for domestic and global export.

Patties Foods Chief Executive Office, Paul Hitchcock said: “The sale and leaseback is part of the business’s future growth strategy. Both facilities are critical to Patties Foods’ operations and this arrangement enables the company to invest in additional growth opportunities to support our people, business and brands. The business has recently entered new categories via acquisition, and we are now in a position to continue this expansion.”

Charter Hall CIO, Sean McMahon, said “The Patties Food portfolio acquisition continues our successful sale and leaseback strategy which has resulted in more than $10.0 billion of sale and leaseback transactions in the past 6 years.”

“Charter Hall through its strong relationships with leading corporate tenants in Australia continues to be dominant in the sale and lease back segment, unlocking exclusive opportunities for our investors. The Patties Foods acquisition also increases Charter Hall’s substantial portfolio in the food logistics sector joining groups including Coles, Woolworths, Metcash, ALDI, Inghams, Coca-Cola Amatil, Arnotts, and Marley Spoon.

“We actively seek out properties leased to tenants in the consumer staples and food logistics sector because our investors consistently tell us that they value the defensive and stable cashflows these properties generate over the long term” said Mr McMahon.

Charter Hall has been extremely active in the industrial market acquiring more than $2.3 billion in industrial and logistics facilities so far in FY21 and $6 billion in the past 3 years. Charter Hall’s total industrial portfolio now stands at $12.4 billion with a $2.3 billion development pipeline.

Charter Hall Direct CEO, Steven Bennett said “Charter Hall Direct Industrial Fund No 4 (DIF4) continues to grow and meet investor demand for high quality exposure to the resilient Australian industrial property market. The acquisition will see DIF4’s WALE extend to a market leading 12.3 years and DIF4 also benefits from the annual 3% rent reviews under the Patties Foods lease. The Fund is currently providing a distribution yield of 5.9% per annum to DIF4 investors.”

“The acquisition is consistent with DIF4’s strategy to acquire industrial properties leased to quality tenants on long terms leases” said Mr Bennett.

DIF4 is currently a $1.5 billion unlisted property fund, with capacity to grow to over $2.0 billion. DIF4 invests in a portfolio of quality Australian industrial and logistics properties with the aim to provide investors with sustainable and stable, tax advantaged income and the potential for capital growth from a portfolio with a 12.3 year WALE diversified by geography and tenant customer industries, with average property rental growth of 2.7% per annum and 99.9% occupancy.

DIF4 is currently open for investment providing the potential to receive sustainable and stable-tax advantaged income paid quarterly and the potential for capital growth.

DIF4 is currently available on the following platforms: Asgard, Direct, BT Wrap, BT Panorama, Macquarie, Netwealth, Hub24, Powerwrap, First Wrap, and North.

The transaction was jointly managed by Tony Iuliano & Adrian Rowse of JLL & Andrew Grant of Charter Keck Cramer.

Steven Bennett

Charter Hall Direct is pleased to announce that the Direct Industrial Fund No.4 (DIF4) has acquired 130-170 Andrews Road, Penrith in Sydney for $88 million, as part of a portfolio of sale and lease back deal with Owens-Illinois Australia (OIA).

Charter Hall through its strong relationships with leading corporate tenants in Australia continues to be dominant in the sale and lease back segment, unlocking exclusive opportunities for investors.

The sale and lease back agreement provides for a 20 year triple net lease, with fixed 3.0% annual rent reviews. OIA has recently announced that they are divesting their Australian operations to Visy, a leading packaging & resource recovery company. A wholly owned subsidiary of Visy will be the tenant once the deal is complete at the end of July.

Three properties were part of the deal, a Charter Hall wholesale fund simultaneously acquired 21 Simcock Avenue, Spotswood, VIC 3015 in Melbourne and 617-625 Port Road, West Croydon in Adelaide for a total of $126 million.

The DIF4 property is a glass manufacturing facility with an adjoining warehouse. OIA is the leading manufacturer of glass for the Australian food and beverage industry with clients including CUB, Asahi/Schweppes, Lion, Simplot, and Bega.

Charter Hall Direct CEO, Steven Bennett, commented “DIF4 continues to grow and meet investor demand for high quality exposure to the resilient industrial property market. This acquisition shows the strength of the Charter Hall Group acquisition pipeline, utilising the combined capacity of its suite of funds to secure properties not ordinarily available to retail, HNW and SMSF investors.”

DIF4 Fund Manager, Miriam Patterson said “The acquisition of the Penrith property enhances the Fund’s quality of income given the 20 year triple net lease, increases Sydney concentration and extends the Fund’s WALE to a market leading 10.8 years. The additional benefit of the triple net lease structure is that the landlord is not responsible for any ongoing costs in relation to the maintenance and upkeep of the property. The acquisition supports the current distribution yield of 6% available to investors in DIF4.”

DIF4 is currently open for investment with a minimum investment of $20,000, the potential to receive sustainable and stable-tax advantaged income paid quarterly and the potential for capital growth.

DIF4 is currently available on the following platforms:  Asgard, Direct, BT Wrap, BT Panorama, Macquarie, Netwealth, Hub24, Powerwrap, First Wrap, and North.

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.”

——–

[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.

The Executive Committee of PFA recently elected Steven Bennett, Head of Charter Hall Direct, as the new President of PFA’s National Executive Committee, taking over the role from Mark Pratt, Executive General Manager –  Property at Australian Unity.

The Association also elected Andrew Cannane, Executive Director at Evans Dixon as the Committee’s new Vice President.

Formed in 1998 PFA was established to provide the growing number of direct property investors and managers with an organisation to represent their interests, promote their industry and provide a forum for research and education.

Paul Healy, Chief Executive Officer, PFA noted: “We welcome our new President and Vice President to the Executive Commitee. The Executive Committee is the decision-making body of the Association and comprises of PFA members which represent the various areas of the Association’s constituency. Both Steven and Andrew are regarded as experienced direct property professionals in the commercial property space and we look forward to their insights and contribution in growing investor awareness around the direct property sector.

“I would like to thank our previous President, Mark Pratt, for his contribution towards growing the Association’s scope to represent the advisors, consultants and representatives of property investors and managers.”

Steven Bennett, Head of Charter Hall Direct, added: “I am honoured to be appointed in this new role. Having been a member of the Association since 2014, I believe the Association will continue to play an integral role in representing the interests of the direct property industry.

“Over the last two decades, this sector has grown dramatically and has become a core investment class for growing the wealth of Australian investors by providing strong risk adjusted returns and a stable source of regular income.

“Apart from the high levels of ongoing income, what makes direct property so compelling is its low correlation with other asset classes providing effective diversification benefits and lower relative volatility. This means direct property investments react in a different manner to varying economic conditions compared to other major investment classes such as shares and bonds.

“For this reason, we believe, investors will continue to hold direct property as an essential component in their portfolios,” said Mr Bennett.

The Annual PFA Conference for 2019 will be held in Hobart from 5-7 May. It will review the activity in global and local markets and examine whether current times are a crisis, challenge or catalyst for property investment.

Key Conference speakers include:

• David Harrison, Managing Director and Group CEO, Charter Hall
• Simon Garing, Acting Chief Executive Officer and Executive Director, Cromwell EREIT Management
• Justin Smirk, Director – Senior Economist, Westpac Institutional Bank
• Penny Ransom, Group Executive, Head of Investment Management, Investa Property Group
• Rob de Vos, Managing Director, Arena REIT

More information about the Conference.

Steven Bennett

Charter Hall Direct, part of the Charter Hall Group (ASX:CHC), one of Australia’s leading property investment and funds management groups with $23.2 billion under management, has announced three significant property acquisitions in Sydney and Queensland for its funds totaling $126 million.

A 10-storey freehold building at 40 Tank Street in Brisbane CBD has been acquired for $93 million, with the ownership to be shared 50% by the unlisted Charter Hall Direct PFA Fund (PFA) and 50% by the ASX-listed Charter Hall Long Wale REIT (ASX:CLW).

The property comprises 6,218 sqm of NLA over five floors, 327 car spaces and ground floor retail. The commercial space is 100% occupied by the Queensland State Government with a 6.3 year WALE (weighted average lease expiry) which includes carpark lease over 300 bays to a separate tenant.

The transaction equates to an initial yield of 5.84% p.a. and a rate of $7,525/sqm of lettable area (excluding car bays). Following the acquisition, PFA and CLW will continue to provide any outstanding tenant incentives in accordance with the leases.

Steven Bennett, Head of Direct at Charter Hall said: “The Tank Street acquisition meets the key requirements of the Charter Hall Direct PFA Fund which is focused on acquiring and managing properties leased by government and high quality corporate covenants: it’s located in a major CBD and the major tenant is the QLD State Government on a long lease.

The Charter Hall Direct PFA Fund has a current income yield of 6.9%¹ p.a.

“This purchase will increase the diversification of the PFA property portfolio which will now exceed $400 million and will maintain the fund’s current leasing profile of 100% occupancy and a portfolio weighted average lease term of 8.1 years,” Bennett said.

The second property acquired is the $71.6 million purchase of a brand-new freestanding cross dock warehouse facility on a 6.8ha site in the prime south western Sydney industrial suburb of Prestons.

The industrial facility is located 45 kilometres west of Sydney in the heart of the rapidly expanding industrial and logistics zone in the vicinity of the M5 and M7 motorways, Westconnex, the Moorebank intermodal, the Badgerys Creek Aerotropolis and the proposed M9 and M12 motorways.

This property, located at 55 Yarrunga Street, Prestons, will be leased to Mainfreight Distribution and will be owned and managed 100% by the Charter Hall Direct Industrial Fund No.4, known as DIF4.

The property’s GLA when complete is forecast to be 30,796sqm, which includes 975sqm of office space. Construction on the Prestons site is due for completion in the last quarter of 2018 with the property 100% leased with a 10.5-year WALE, with annual CPI rent reviews.

The Charter Hall Direct Industrial Fund No.4 has a current income yield of 6.2%² p.a.

The third property acquired is the $7.9 million purchase of a food retail complex in Burleigh Waters, 80 kilometers south east of the Brisbane CBD. The property comprises two free standing buildings, including a Red Rooster drive through restaurant and a separate complex of five food restaurants, with an average lease term of 6.5 years. The space also provides car parking for 45 vehicles.

Demand for food retail is correlated to population growth and the purchase meets the Charter Hall Direct Consumer Staples Fund (DCSF) mandate to target consumer staples tenants that have resilience through investment cycles.

DCSF also recently announced that it acquired the retail component of Festival Towers, 108 Albert Street, Brisbane, QLD (Festival Towers) for $32 million, which reflects a core cap rate of 5.50%.

Festival Towers comprises the ground floor retail complex within the 39-storey mixed use tower, directly adjoining the proposed new Albert Street Cross River Rail Station. The street level retail provides a total lettable area of 1,033 sqm and is 100% leased to six international and national retailers with an existing WALE of approximately 4.5 years by income. The tenants suit the Fund’s “Consumer Staples” strategy and include Starbucks, Priceline Pharmacy, Grill’d, Nando’s Chicken and San Churro Chocolates.

The Charter Hall Direct Consumer Staples Fund has a current income yield of 6.7%³p.a. The three transactions take Charter Hall Direct’s suite of funds to more than $3.3 billion.

Mr Bennett said high quality direct property funds were increasingly attractive to SMSF investors given that many banks have announced restrictions on lending within self-managed super funds.

“Charter Hall Direct funds offer the prospect of total returns of around 9% p.a. with monthly or quarterly income distributions depending on the fund. The combination of attractive returns backed by quality tenants on long leases is, we find, resonating with SMSF investors in particular,” Mr Bennett said.

Notes

1. PFA’s yield based on actual distribution of 7.25 cents per unit (annualised) for the June 2018 quarter and $1.05 unit price at 1 July 2018.
2. DIF4’s yield based on actual distribution of 6.50 cents per unit (annualised) for the June 2018 quarter and $1.05 unit price at 1 July 2018.
3. DCSF’s yield based on actual distribution of 6.75 cents per unit (annualised) for the June 2018 quarter and $1.01 unit price at 1 July 2018.

Steven Bennett

Government tenants and long lease terms feature in fund offering 7% p.a.^[1] income.

The Charter Hall Direct PFA Fund (PFA), featuring high quality office buildings across Australia, is now more widely available to investors as a result of being added to both the BT Wrap platform and innovative platform, BT Panorama.

The fund is available on both platforms as of April 2018.

Key features of the fund include monthly tax-advantaged distributions, an occupancy rate of 100%, a high proportion of government tenants – 72%, and an attractive weighted average lease expiry (WALE) of 8.4 years.

The fund, valued at $344 million, owns seven office buildings in capital cities across six states.

Head of Charter Hall Direct, Steven Bennett, said PFA provides an opportunity for investors and SMSF trustees and members to acquire an interest in high quality buildings in major markets leased to excellent tenants on long leases.

“This formula translates into an attractive current distribution yield of 7%pa1, paid monthly with potential for capital growth.

“These numbers compare very favourably to current interest rates available on cash at 1.5%^{[2][1] PFA’s yield based on forecast distribution of 7.25 cents per unit over the forecast period being 1 July 2017 to 30 June 2018 (annualised), and $1.03 unit price at 1 April 2018.
[2] Rate as at 31 December 2017. Each investment has different liquidity and risk profiles. ]]>}

Steven Bennett

Government tenants and long lease terms feature in fund offering 7% p.a.^[1] income.

The Charter Hall Direct PFA Fund (PFA), featuring high quality office buildings across Australia, is now more widely available to investors as a result of being added to both the BT Wrap platform and innovative platform, BT Panorama.

The fund is available on both platforms as of April 2018.

Key features of the fund include monthly tax-advantaged distributions, an occupancy rate of 100%, a high proportion of government tenants – 72%, and an attractive weighted average lease expiry (WALE) of 8.4 years.

The fund, valued at $344 million, owns seven office buildings in capital cities across six states.

Head of Charter Hall Direct, Steven Bennett, said PFA provides an opportunity for investors and SMSF trustees and members to acquire an interest in high quality buildings in major markets leased to excellent tenants on long leases.

“This formula translates into an attractive current distribution yield of 7%pa1, paid monthly with potential for capital growth.

“These numbers compare very favourably to current interest rates available on cash at 1.5%^{[2][1] PFA’s yield based on forecast distribution of 7.25 cents per unit over the forecast period being 1 July 2017 to 30 June 2018 (annualised), and $1.03 unit price at 1 April 2018.
[2] Rate as at 31 December 2017. Each investment has different liquidity and risk profiles.}

The post Charter Hall Direct PFA Fund added to BT Wrap and BT Panorama appeared first on AdviserVoice.

Steven Bennett

Charter Hall Direct, part of leading property investment and funds management group Charter Hall Group (ASX:CHC), has announced a partnership with independent investment information platform, Informed Investor.

This platform aims to enhance investors’ and financial adviser’s knowledge of Australian commercial property markets and investment products based on this asset class.

Informed Investor partners with financial product and financial service providers to publish product information on a non-aligned platform.

Steven Bennett, Head of Charter Hall Direct said: “The Informed Investor platform was developed to provide a greater depth of information and education to both investors and the financial adviser community. This is strongly aligned with our aspirations to offer knowledge and education of the institutional commercial property markets, investment pathways and retirement savings.

“An accessible and independent source of information such as this is welcomed, and Charter Hall Direct is pleased to produce educational and engaging content to reduce financial complexity,” said Bennett.

Charter Hall is one of Australia largest investment property managers with almost $22 billion under management in Australian real estate investment trusts (AREITs), Direct Property funds (also known as unlisted property funds), unlisted wholesale funds and private syndicates.

“Charter Hall Direct joins a growing list of major investment industry names who have joined our Informed Investor platform,” said Tim McGowen, CEO of Informed Investor.

“Charter Hall is a respected leader in its field, a ASX Top 100 entity, and enjoys an international reputation for both performance and the group’s values. They share our commitment to better informed investor community and we are delighted they are joining our platform,” McGowen said.

“We are working together to create digital content which will be used as an aide to better understand the Product Disclosure Statements (PDS) individual investment products must produce. We also use tools like videos and quizzes to measure this understanding, in addition to offering CPD points to financial advisers” he noted.

Steven Bennett

One of Australia’s largest unlisted managers of investment-grade office buildings, Charter Hall Direct Property, today announced the launch of a new unlisted office property fund for retail investors, self managed super funds trustees and high net worth investors.

The fund, called the Charter Hall Direct PFA Fund (PFA or fund), features quality office buildings located in emerging or established office markets around Australia and predominantly leased to government tenants.

The current income yield for PFA is 7.25% per annum^[1], paid monthly, and is targeting more than a 9% per annum total return. The fund has an initial investment term of five years. PFA has a conservative gearing policy with a target of between 30% to 45%, and its gearing currently is 28%.

Key features of the fund include a high proportion (>70%) of income sourced from government tenants, and an attractive weighted average lease expiry (WALE) of 9.2 years^[2].
Initially PFA will own six office buildings, with a newly acquired office development in Adelaide fully leased to the South Australian Government on a 15-year lease term.

The initial portfolio also includes the Foxtel Building in Moonee Ponds, Vic; 9 Wentworth Place, Parramatta, NSW; 303 Sevenoaks Street, Cannington, WA; 134 Macquarie Street, Hobart, Tas; and Anzac Square, Brisbane, Qld.

Including the South Australian property, PFA will have just under 60,000sqm NLA with a total valuation of $268 million, an average capitalisation rate of 7.36%.

Head of Charter Hall Direct, Steven Bennett, said that PFA is yet another example of the Group’s offering of funds that deliver strong returns to investors with a focus on income security.

“The launch of PFA provides an opportunity for investors and SMSF trustees and members to acquire an interest in quality buildings in major markets leased to credit rated tenants on long leases.

“This formula translates into the prospect of an attractive yield of 7.25% per annum, paid monthly, and a projected total return of over 9% per annum. Monthly distributions have proved to be an extremely attractive feature for many retail investors who are looking for a stable earnings stream.

“Further, PFA’s projected yield compares very favourably to current interest rates, where 2-year term deposits are averaging around 2.3% and ASX listed stock yields of an average 4%.

Commenting on the Adelaide property acquisition, Mr Bennett said the property was located in the state government’s urban regeneration precinct of Port Adelaide and is scheduled for completion in April 2018.

“Comprising a total NLA of 6,382 square metres, the property is leased for 15 years to the South Australian Government and features fixed annual rent reviews of 3.0%.

“The long lease, attractive lease terms and high depreciation benefits make this an outstanding acquisition for the fund and its investors,” Mr Bennett said.

Minimum investment in the Charter Hall Direct PFA Fund is $20,000.

The Fund has been assessed by independent research house, Lonsec, and been given a ‘Recommended’ rating^[3].

Lonsec acknowledged the “solid portfolio of A&B-grade office properties in mainly suburban emerging locations”, the “excellent tenant profile with 71% to government” and “relatively high FY18 pre-tax distribution yield”.

The quality and experience of the Fund’s management was identified with Lonsec noting the “proven management team that adds value”.

Mr Bennett said “We now have three funds that are open for investment with a recommended or highly recommended rating by Lonsec. We are delighted that Lonsec continues to acknowledge our underlying investment structures and our strong competitive advantage in people and process”.

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[1] Forecast distributions of 7.25% per annum over the forecast period, being 1 July 2017 to 30 June 2018. Forecast distributions are based on the properties in the portfolio and units on issue as at the date of the PDS. Assumes that investors acquire units at the $1.00 per unit initial issue price.
[2] As at 1 July 2017. Portfolio size, occupancy and weighted average lease term calculations do not include the Fund’s asset at 657 Pacific Highway, St Leonards which, as at the date of the PDS, was subject to a binding contract for sale. Additionally, these calculations include the Fund’s asset at Lot 107, Nile Street, Port Adelaide and terms of the 200 Adelaide Street, Brisbane property’s Heads of Agreement as at the date of the PDS. Refer to the PDS, in particular section 3, for further details.
[3] The Lonsec Rating (assigned August 2017) presented in this document is published by Lonsec Research Pty Ltd ABN 11 151 658 561 AFSL 421 445. The Rating is limited to “General Advice” (as defined in the Corporations Act 2001 (Cth)) and based solely on consideration of the investment merits of the financial product(s). Past performance information is for illustrative purposes only and is not indicative of future performance. It is not a recommendation to purchase, sell or hold Charter Hall Direct PFA Fund product(s), and you should seek independent financial advice before investing in this product(s). The Rating is subject to change without notice and Lonsec assumes no obligation to update the relevant document(s) following publication. Lonsec receives a fee from the Fund Manager for researching the product(s) using comprehensive and objective criteria.

Steven Bennett

There is a strong interest in commercial property as an asset class as investors seek capital gains and security, as well as income, according to Australia’s largest direct property investment fund manager, Charter Hall.

Statistics produced by Charter Hall reveal this trend, showing a rise in the number of Australians invested in listed and unlisted property trusts between 2014 and 2016 from eight per cent to 13 per cent.

These statistics were reaffirmed by a recent Charter Hall survey of its investors where 43 per cent of respondents had more than 10 per cent of their portfolio in commercial property, and of this some 24 per cent had more than a 20 per cent holding in commercial property.

Australian Tax Office figures for the self-managed super fund (SMSF) sector reinforce this trend for commercial property, with investment by fund members rising from $53.2 billion in June 2012 to $78.2 billion in March 2017, a 46.9 per cent gain.

Steven Bennett, Head of Direct Property at Charter Hall, says investors see commercial property providing stable income with a lower capital risk than other investment classes.

“The three drivers behind growing investor interest in commercial property is income; the relatively low level of risk; and capital gain driven by long leases with fixed rental growth.

“Investors can get pre-tax returns above six per cent, and when coupled with capital growth of between three and four per cent, they can be looking at a total return of more around 10 per cent which is in line with the long term average for direct property. For SMSF trustees in the pension phase this comes tax-free.”

Bennett says commercial property, like any asset class, requires investors to do their homework.

“Although commercial property is typically less volatile than the share market, investors still need to understand the investment fundamentals including projected returns, the quality of the underlying property asset, the financial strength of the tenants, the length of the lease term, and the managers track record.”

“At Charter Hall, the focus is on institutional grade property and not using excessive gearing. With our investments, debt is typically between 30 per cent and 45 per cent, depending on the individual asset.

“With unlisted property funds, there is the added attraction of all the debt being internalised. In our opinion this is a better option for SMSF trustees than a limited recourse borrowing arrangement with the complexity and administrative burden these arrangements entail,” Mr Bennett added.

Bennett adds that for SMSF trustees, the introduction on 1 July of the $1.6 million assets cap on SMSFs in the pension phase, whereby assets above this limit must transfer back to an accumulation fund and pay 15% tax, is not a “major issue”.

“SMSF trustees can simply transfer units or a portion of the units in an unlisted property fund from a pension to accumulation fund, which allows them to maintain exposure to the sector.”

1 Nicholson Street, Melbourne.

One of Australia’s largest investors of investment-grade office buildings, Charter Hall Group, today announced its market leading Direct Office Fund (DOF) has leased several floors at 1 Nicholson Street, on the northern edge of Melbourne CBD for an 8-year term.

Market leading water treatment and chemicals company, Ixom, has leased three levels of 1 Nicholson Street, Melbourne.^[1]

Nicholson Street is an iconic and architecturally significant Melbourne building, being the first glass wall skyscraper built in the city. It is located opposite Parliament Gardens at the intersection of Lonsdale/Albert and Nicholson/Spring Streets with commanding views and natural light throughout.

Head of Charter Hall Direct, Steven Bennett said: “We are pleased to partner with an existing customer to deliver property solutions that meet their individual business requirements and create value.

“We are excited that Ixom will continue to be located at the iconic 1 Nicholson Street building, and that they value the quality of the building and its strategic location in one of the most desirable precincts of the city,” Mr Bennett said.

DOF currently comprises 10 office buildings in Sydney, Melbourne, Brisbane and Perth with a total value as at December 31, 2016 of $1.025 billion.

DOF is currently open to investors who can expect to earn 6.25% per annum income distribution with the prospect of capital growth and the advantage of partial tax deferred tax returns.
DOF returned 15.9% per annum in the 12 months to 31 December 2016. This compares to the benchmark return – the MSCI/IPD Australian Unlisted Wholesale Property Fund Index – of 11.1% over the same period.

“DOF is a flagship fund for the Charter Hall Direct business. Its key characteristics of long WALE (weighted average lease expiry), 100% occupancy, exposure to the strategic markets of Sydney and Melbourne accounting for over 75% of the fund’s portfolio, conservative gearing, and high quality tenants, is emblematic of the Charter Hall approach to property investing and a reason for our ongoing success,” Mr Bennett added.

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[1] Yield based on the December 2016 quarter distribution (annualised) of 7.75 cents per Unit and the 1 January 2017 unit price of $1.24. Distributions for future quarters may vary. To obtain current unit pricing visit www.charterhall.com.au/dof-unitprice