Domestic institutions jump on Charter Hall's $725m capital raising
Logistics-hungry domestic institutions piled into Charter Hall Prime Industrial Fund’s (CPIF) $725 million capital raising as they sought to reduce their exposure to retail property and put more money into an industrial sector turbocharged by growing demand for e-commerce facilities.
Local investors – many of whom were underweight on logistics relative to their overseas counterparts – provided a majority of the new capital in the oversubscribed raise and tipped the wholesale fund from a 60-40 weighting towards offshore investors into balance between local and foreign, CPIF fund manager Richard Mason said.
“A lot of domestics are probably overweight in retail and trying to re-weight that,” Mr Mason told The Australian Financial Review on Wednesday.
“That’s what’s driving a lot of demand for logistics.”
Mr Mason would not reveal the forecast return of the fund, which made total annualised returns of 10.1 per cent in the three years ended September 30.
But the capital raising, which gives the $3.9 billion fund with target gearing of 30 per cent the capacity to grow to more than $5 billion in size, shows a sector steadily buoyed by investors looking for better returns in a global environment of low interest rates.
“Global investment conditions remain very favourable for the Australian commercial property market, which is competitive for high-quality, long-leased investment assets,” said David Harrison, Charter Hall managing director and chief executive.
“The raising demonstrates Charter Hall’s ability to source capital from the unlisted market and marry that equity with high-quality investment opportunities in the industrial logistics sector.”
In financial 2019, CPIF, of which ASX-listed parent Charter Hall holds a 4 per cent stake, had a weighted average lease expiry of 10 years. As much as 85 per cent of the fund’s portfolio by value sits in the key land-constrained and high-performing eastern seaboard markets of Sydney, Melbourne and Brisbane.
Its existing land holdings have the capacity to develop over 650,000sq m of new core logistics facilities with an anticipated value on completion of $1.2 billion.
“Record infrastructure spending on road and rail, combined with rising e-commerce and companies seeking supply chain efficiencies through new highly automated facilities, is driving the demand for logistics premises, particularly in Sydney, Melbourne and Brisbane,” Mr Mason said.
“At the same time, supply of modern logistics facilities is low, pushing vacancy rates lower and rents higher.”
Recent acquisitions include retailer Metcash’s regional distribution centre in Brisbane’s Crestmead, the Coca-Cola production facility in Perth’s Kewdale and Bombardier’s Australian headquarters in Dandenong South, Melbourne.
Developer and fund manager Charter Hall last year booked a bumper 25.5 per cent lift in operating earnings. The increase in the full-year operating result, to $220.7 million, betters the guidance issued most recently at the start of July of a 24 per cent increase and follows several earlier upgrades in profit expectations through the year.
CPIF has been actively tweaking its portfolio. Last month it sold three assets, out of a pool of five it was offering, in South Australia, Western Australia and Northern Territory to the newly listed Investec Australia Property Fund for $81 million.
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