Charter Hall has launched its Long WALE REIT, valued at $1.12 billion, focusing on high-grade offices and with forecast 2017 financial year annualised earnings and distribution yields of 5.3 per cent per security.
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It will be added to Charter Hall's existing suite of funds and will invest in Australasian properties that are leased to corporate and government tenants on long-term leases. The initial portfolio will be diversified by geography and real estate sector, containing office, industrial and retail properties located in the six Australian states.
It comes at a time when office markets are on an upward trajectory in terms of rental growth and falling vacancies.
According to Knight Frank's head of office agency John Preece, the overall vacancy rate in the Sydney CBD is expected to trend down towards 3.5 per cent by the end of 2018.
The REIT will comprise an initial portfolio of 66 properties independently valued at $1.2 billion with a weighted average capitalisation rate of 6.4 per cent, a weighted average lease expiry of 12.5 years and occupancy of 100 per cent.
Charter Hall has paid $140.5 million for a half-share of Coles headquarters, dubbed "Battlestar Galactica", at 800 Toorak Road, East Hawthorn, from Investa Office Fund.
While no decision has been made, the new asset may be included in the properties earmarked for the Long WALE REIT.
Long WALE REIT's fund manager will be Avi Anger, the deputy fund manager will be Ben Ellis and Kerri Leech will be its head of finance.
The REIT will also benefit from access to Charter Hall's broader platform and its sourcing of investment opportunities, the $12.6 billion worth of transactions executed over the past five years, including $9.3 billion in acquisitions and $3.3 billion in divestments.
The independent chairman is Peeyush Gupta while Glenn Fraser and Ceinwen Kirk-Lennox are independent non-executive directors. Charter Hall Group chief executive managing director David Harrison and Charter Hall head of office Adrian Taylor are also on the board as executive directors.
The directors are talking to Australian institutional investors and next week head off to Asia for meetings.
Mr Harrison said: "Long WALE REIT's objective is to provide investors with stable and secure income and the potential for both income and capital growth through an exposure to long WALE properties. We see a gap in the AREIT market for this diversified long WALE portfolio and expect it to be attractive to both institutional and retail investors."
Charter Hall has appointed J.P. Morgan Australia and UBS as joint lead managers and King and Wood Mallesons as legal advisor.
