Charter Hall Office REIT (CQO), the Australian property company, is seeking offers for a U.S. portfolio that may fetch more than its $1.7 billion book value, according to four people with knowledge of the sale.
Blackstone Group LP (BX), Brookfield Asset Management Inc. (BAM/A) and Highwoods Properties Inc. (HIW) are among the firms that have expressed interest in some or all of the 14 U.S. assets, which include offices in Boston and Washington, said the people, who asked not to be named because the process is private. Bank of America Corp. (BAC), hired by Sydney-based Charter Hall to evaluate offers, plans to send out materials on the properties this week, the people said.
Charter Hall investors have pressured the company to change its strategy of pursuing a U.S. joint venture, saying an outright sale would provide more value. Hedge fund Orange Capital LLC, the second-biggest shareholder based on data compiled by Bloomberg, urged the REIT to consider alternatives including a sale of the assets.
“The stated book value here of about $1.7 billion is way off and these assets could trade at a significant premium to book value,” Orange Capital managing partner Daniel Lewis said in an interview. “We are adamantly opposed to the proposed joint venture and have made our view clear to the board.”
Charter Hall’s shares added 1.5 percent to A$3.49 at the 4:10 p.m. close of trade in Sydney, a fifth day of gains.
Range of Options
The shares have risen 17 percent since Jan. 12, the day before New York-based Orange Capital disclosed a stake in the company and said it hired its own advisers to review alternatives to a joint venture. Bank of America was hired to evaluate interest in the U.S. portfolio “in light of improving market conditions,” the company said on Feb. 23.
“We’re exploring interest from a broad range of interested parties and any decision we make as always will be in the best interest of unit holders,” said Rachel Mornington-West, a Sydney-based spokeswoman for Charter Hall.
Charter Hall said in February that it was considering alternatives to a joint venture and received “a number” of approaches from parties that wanted to buy its U.S. assets.
Spokesmen from Bank of America, Blackstone, Brookfield and Highwoods declined to comment.
Charter Hall, which has an occupancy rate of 82 percent in the U.S., returned to profit in the six months to Dec. 31, as improving economic conditions in the U.S. drove leasing activity higher, and upgraded its full-year operating earnings forecast. The trust announced in January it had sold its assets in Japan and has exited all but one of its investments in Europe, as part of its strategy to focus on its Australian business.
Orange may push Charter Hall to sell off its Australian assets as well, one of the people said. Luxor Capital Group LP, another New York-based hedge fund, also owns more than 5 percent of the shares. Orange Capital held about 7.1 percent as of March 1.