Charter Hall office fund raises $100m from SMSFs, says plenty more on the way

Australian Financial Review

7 December 2016

Larry Schlesinger

Charter Hall’s Direct Office Fund has raised almost $100 million from self- managed super fund investors and other high net worth investors to fund future acquisitions in a sign of strong appetite for real estate investment despite a tightening of super rules.

In addition, the value of the unlisted fund’s portfolio has reached $1 billion with the recent $140.5 million acquisition of a half-share in Coles’ Toorak Road headquarters to be transferred into DOF.

Charter Hall bought its half share in Coles’ Melbourne headquarters in September from the listed Investa Office Fund with speculation it would find a home in either the Prime Office Fund or the Direct Office Fund, which had recently launched a $250 million equity raising.

The Australian Financial Review reported recently that some SMSF investors were looking to reduce their property holdings because of new super rules that will impose new taxes on pension balances above $1.6 million from mid-next year.

“Following strong investor demand and Charter Hall’s continued access to a pipeline of high quality, well located Australian office property, the fund is targeting to grow the DOF property portfolio to $1.2 billion,” said Nick Kelly, Charter Hall’s head of direct property.

The Coles head office at 800 Toorak Road is fully-leased to the Wesfarmers-owned supermarket  group for an initial 15-year lease term expiring in March 2030.

The building comprises 39,399 square metres of net lettable office space, a five level central atrium, dining facilities, conference centre, laboratory and test kitchen facilities, gymnasium, Kmart Tyre and auto centre, data centre and parking for 1200 vehicles and an adjoining 1249 vehicle multi-deck carpark, constructed in 2015.

DOF currently comprises a portfolio of 10 fully leased office buildings in Sydney, Melbourne, Brisbane and Perth.

DOF fund manager, Steven Bennett, said the fund has been strategically weighted to the Sydney and Melbourne office markets, which will increase from 76 per cent to 80 per cent of the funds’ assets by value as a result of the Coles HQ acquisition.

“Despite the recent broader listed market volatility, unlisted investor demand for direct property remains robust due to the income yield and growth in distribution driven by long leases with fixed rental growth,” Mr Bennett said.

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