Charter Hall sells stake in US joint venture to focus on Australia

THE Charter Hall Retail Real Estate Investment Trust has further severed its links with the US by selling for $US168 million of its 60 per cent interest in the long-running joint venture with the Desco and Regency groups.

By InvestSMART · 14 Dec 2010

By InvestSMART ·
14 Dec 2010

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The stake was bought more than eight years ago when Charter Hall Retail was trading as Macquarie CountryWide Trust and comprised 32 shopping centres in the US predominantly along the eastern seaboard. The chief executive of Charter Hall Retail Real Estate Investment Trust, Steven Sewell, said parties associated with Desco had entered into a sale agreement, and the funds raised would be used to repay Charter Hall Retail's debt.

Mr Sewell said the deal, when closed, would eliminate $US107 million of debt, release about $64.72 million of cash and reduce the trust's balance sheet gearing to about 36 per cent.

"The portfolio sale, which accounts for about 53 per cent by value of the remaining United States investments, delivers on the [trust's] strategy of reweighting its portfolio to Australia and will increase the proportion of net tangible assets ... represented by the Australian portfolio to 78 per cent," he said in a statement to investors.

"The announcement is another step in the delivery of our key objective of realising the equity from our investments in the United States and New Zealand, with the proceeds of this sale to be reinvested into subregional shopping centres in Australia."

He said that when the sale was complete the trust's US portfolio would represent only 8 per cent of net tangible assets, and the trust remains on track to sell most of the balance of its US investments by next June.

Trading in diversified trust FKP Property Group was hectic yesterday. More than 17 million units changed hands, and the price fell 5.92 per cent to 79.5?. Brokers were unclear about the sale, saying it was general trade rather than a sell-off by Stockland.

Stockland owns 173 million units in FKP and has first right of refusal over FKP's retirement assets, making it an unlikely seller.

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Frequently Asked Questions about this Article…

What did Charter Hall Retail Real Estate Investment Trust sell in the US joint venture?

Charter Hall Retail sold its 60% interest in a long-running US joint venture with the Desco and Regency groups for US$168 million. That JV originally comprised 32 shopping centres, mainly along the US eastern seaboard.

Why did Charter Hall Retail sell its stake in the US joint venture?

According to CEO Steven Sewell, the sale supports the trust’s strategy of reweighting the portfolio to Australia. Proceeds will be used to repay debt and to reinvest equity from US and New Zealand investments into Australian subregional shopping centres.

How will the sale affect Charter Hall Retail’s debt and gearing?

When the deal closes the trust expects to eliminate US$107 million of debt, release about $64.72 million of cash and reduce balance-sheet gearing to around 36%.

What impact will the sale have on the trust’s portfolio allocation and net tangible assets (NTA)?

The sale accounts for about 53% by value of the remaining US investments and will increase the proportion of net tangible assets represented by the Australian portfolio to about 78%. After completion the US portfolio should represent only about 8% of NTA.

Will Charter Hall Retail sell more US assets after this transaction?

Yes. The trust said it remains on track to sell most of the balance of its US investments by next June, continuing its objective of realising equity from overseas holdings.

Where will the proceeds from the US sale be reinvested?

The proceeds are intended to be reinvested into subregional shopping centres in Australia as part of the trust’s strategy to increase its Australian weighting.

What happened to FKP Property Group units around the time of the Charter Hall announcement?

Trading in diversified trust FKP Property Group was heavy, with more than 17 million units changing hands. The unit price fell 5.92% to 79.5 (as reported). Brokers said the activity looked like general trade rather than a targeted sell-off by Stockland.

What’s Stockland’s connection to FKP and could it be selling units?

Stockland owns 173 million units in FKP and has first right of refusal over FKP’s retirement assets, which makes it an unlikely seller of FKP units according to the report.