Charter Hall buys Gordon shopping centre

The trust has been cutting its exposure to US property.

By InvestSMART · 24 Dec 2010

By InvestSMART ·
24 Dec 2010

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THE Charter Hall Retail REIT has paid $67 million for the Gordon shopping centre in Sydney's north, in line with its strategy to be a retail landlord focusing on Australia.

The vendor was a Dexus Group-managed private syndicate that will use the funds for other investments.

The Charter Hall trust will use the funds from the sale of its 60 per cent interest in a US portfolio of 32 properties, owned in partnership with Desco Group and Regency Centres, to buy the Gordon centre.

Under the US deal, parties associated with Desco will buy the trust's interest for a gross sale price of $US168 million, representing a yield of 8.5 per cent. Regency has elected to take a distribution in kind of four assets for its 16 per cent interest.

Macquarie Equities analysts said the trust's management intend to reinvest in sub-regional assets which have a national average yield of 7.7 per cent.

Charter Hall Retail REIT was the former Macquarie CountryWide Retail trust, whose management rights were sold to the Charter Hall Group in March this year.

Since then the trust has been cutting its US exposure to focus on being an Australian retail landlord.

Steven Sewell, the chief executive of the Charter Hall trust, said the Gordon mall was a "sweet spot" in terms of demographics and development potential. "The size of the centre is perfect to redevelop and add value," he said.

The trust's stablemate, Charter Hall Office REIT, said yesterday it had extended the term of its Australian syndicate debt facility to January 2014, from its current maturity date of September next year.

That trust's chief executive, Adrian Taylor, said the extension and other capital management initiatives over the past 12 months had enabled it to repay or refinance about $1 billion of debt.

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Frequently Asked Questions about this Article…

What did Charter Hall Retail REIT buy and where is the Gordon shopping centre located?

Charter Hall Retail REIT paid $67 million to buy the Gordon shopping centre, which is located in Sydney’s north.

How did Charter Hall fund the $67 million purchase of the Gordon shopping centre?

The trust funded the purchase using proceeds from the sale of its 60% interest in a US portfolio of 32 properties, a transaction that provides the cash needed to buy the Gordon centre.

What are the key details of the US portfolio sale that funded the purchase?

Under the US deal, parties associated with Desco will buy the trust’s 60% interest for a gross sale price of US$168 million (a reported yield of 8.5%). Regency Centres held a 16% interest and elected to take a distribution in kind of four assets.

Why is Charter Hall Retail REIT focusing on Australian retail assets instead of US properties?

Since the Charter Hall Group took management rights (formerly Macquarie CountryWide Retail trust), the trust has been reducing US exposure to concentrate on being an Australian retail landlord — reinvesting proceeds into Australian sub-regional assets with an indicated national average yield of about 7.7%.

What did Charter Hall’s CEO say about the investment potential of the Gordon mall?

Steven Sewell, chief executive of the Charter Hall trust, called the Gordon mall a 'sweet spot' for demographics and development potential, saying the centre’s size is ideal for redevelopment and adding value.

Who sold the Gordon shopping centre and what will the seller do with the proceeds?

The vendor was a Dexus Group‑managed private syndicate, and the syndicate will use the funds from the sale for other investments.

Did any other Charter Hall trusts make related capital management moves?

Yes. Charter Hall Office REIT extended the term of its Australian syndicate debt facility to January 2014 (from a September maturity) and its CEO Adrian Taylor said that the extension and other capital management actions over the past 12 months enabled the trust to repay or refinance about $1 billion of debt.

What does this transaction mean for everyday investors watching Charter Hall’s strategy?

According to the article, the deal illustrates Charter Hall Retail REIT’s strategic shift toward Australian retail assets and value-adding redevelopments (like Gordon), funded by selling US assets; investors should note the emphasis on reinvesting into sub-regional assets with roughly 7.7% average yields and continued active capital management across affiliated trusts.