Weekly Transaction Update – 10th August

10 August 2018

In a strong week of trading, this week we recorded 44 major transactions worth close to $1.4b. Charter Hall loves to keep assets within the stable and this week, 2 of Charter Hall’s funds divested 50% interests to two other of its Funds. The first of these is 12 Franklin Street Adelaide, where Charter Hall’s Long WALE REIT sold a 50% interest to it’s Direct Office Fund at a price of $135M, being half the 2017 Book Value of the asset. The Long WALE REIT acquired the asset in Nov 2016 from Charter Hall Prime Office Fund (CPOF) and Telstra Super Fund (each having 50%) for $266M. After transaction costs, the Long WALE REIT is likely to have made a loss on the half share. The second Charter Hall asset on the roundabout was Salamander Bay, which the Charter Hall Retail REIT acquired from CPBIB & the Future Fund in 2017 for $174.5M. Charter Hall have now offloaded 47.5% of the asset to its Prime Retail Fund for the equivalent prorata valuation. Charter Hall’s wholesale fund do in fact deliver substantially more fees to the Group than their listed REITs. For example, the Direct Office Fund pays a 70bps base management fee vs a 45Bps management fee in the Long Wale REIT. Furthermore the wholesale fund pays a performance fee over a 10% return and pays an acquisition fee of 1.5% and a disposal fee of 1.5%, where the listed REIT only charges a 1% acquisition fee. Of course, Charter Hall wouldn’t be transferring the assets to generate more fees. They would need to demonstrate it was in the interest of the unit holders to transfer the assets to related parties. Also in Adelaide, Lend Lease’s APPF sold 60 Flinders Street to Mikos Property Group for around $100M. The purchase price represented a yield of around 7.5%. APPF acquired the asset in 2014 as part of 4 assets it acquired from German real estate fund SachsenFonds for a total of $175M. Also sold this week was the KMart Distribution Centre in Truganina which Invesco sold to Logos for $119M, reflecting a cap rate of 5.45%. The 76,938sqm distribution centre is fully leased to KMart for a further 8 years. Another notable sale this week was the purchase by Dexus of 60 Pitt Street Sydney from Menora Nominees for $82m. Dexus and Brookfield are attempted to consolidate the buildings between Pitt St, Bridge Street, Gresham and Spring Streets. The two buildings not yet under control are 58 Pitt Street, (a strata office) and 62 Pitt Street, currently owned by Kingsmede. Kingsmede are currently selling 110 Eagle Street Brisbane, and could be a seller of 62 Pitt Street at the right price. Brookfield acquired the adjacent building at No 3 Spring Street for $70M in April 2017. If fully consolidated, the block would become one of the most impressive development sites in Sydney. Scroll through the list below or head to ReDataSource for further details. * indicates unconfirmed price or apportionment of a portfolio sale #ReDataSource