Charter Hall Group, owner of the office tower above Sydney’s 125-year-old General Post Office building, plans to buy about A$1.3 billion ($1.3 billion) of offices, shopping centers and warehouses in 2013.
The acquisitions will boost Australian assets under management by 31 percent to about A$11 billion by the end of this year from A$8.4 billion as of June 30, said David Harrison, joint managing director of the Sydney-based property trust. The REIT may consider creating a listed industrial real estate trust to meet investor demand, depending on the availability of such properties, he said.
Australian commercial properties worth A$3.5 billion changed hands in the first quarter, a 15 percent jump from a year earlier, driven by demand from local investors including REITs, according to broker CBRE Group Inc. The S&P/ASX 200 A-REIT Index has an average dividend yield of 4.9 percent, according to data compiled by Bloomberg. That compares with a 3.4 percent yield on 10-year Australian government bonds.
Asset prices haven’t yet reacted to the spread between property income yields and cost of debt, “so we think there’ll continue to be attractive buying,” Harrison said in an interview April 23. “There’s no institutional, Australian-only industrial REIT. We’ll monitor the market and keep tabs on demand.”
Charter Hall reported a 53 percent jump in profit in the six months ended Dec. 31, driven by growing property investment yields and funds under management. It said last week it’s in exclusive due diligence to buy the Raine Square office tower in Perth and in talks to purchase the Westfield Innaloo shopping center, also in Perth.
The company manages the publicly traded Charter Hall Retail REIT, as well as other private funds for institutional and retail investors. Among them is the formerly listed Charter Hall Office Trust, which the Canadian Public Sector Pension Investment Board and Reco Ambrosia Pte, an affiliate of the Government of Singapore Investment Corp., acquired for A$1.2 billion last year.
Australian unlisted property funds had a post-fee return of 7.2 percent in the 12 months to March 31, according to London-based researcher Investment Property Databank.
Charter Hall is now seeking as much as A$110 million in equity for its second unlisted industrial fund for individual investors, David Southon, joint-managing director of the company, said in the interview. It also sees potential for an unlisted office fund targeting retail investors, Southon said.
In October, Charter Hall partnered with the Telstra Super pension fund to buy retail properties worth A$207 million. In February, it established another A$400 million industrial partnership with two Australian institutional investors.
“One of the reasons why you don’t have a good quality industrial REIT is getting access to the assets that are modern in nature, long leases,” Harrison said. “We are looking at the market, and depending on our ability to secure the assets and match that with investment demand will determine whether we go down that path.”
Demand is particularly strong from Asia, with regional buyers accounting for 71 percent of the A$1.4 billion of industrial properties bought by foreign investors since the global financial crisis in 2008, London-based broker Savills Plc said in an e-mailed release on April 16.
Charter Hall shares fell 1.9 percent to A$4.17 at the close of trading in Sydney, trimming their gain this year to 28 percent, compared with a 9.7 percent gain in the benchmark S&P/ASX 200 Index in 2013. They closed at A$4.25 on April 24, more than double the value of the trust’s assets. Charter Hall Retail shares fell 0.5 percent to A$4.29, compared with net tangible assets of A$3.31.