Macquarie pulls out of consortium to bid for Charter Hall Office REIT

The decision by the Macquarie group to sell its stake in the Charter Hall Office REIT to two sovereign funds shows the keenness of offshore investors for Australian commercial assets.

The investment bank pulled out a consortium bid it led to acquire the Charter Hall Office REIT after selling its stake in the trust to two sovereign funds that formed part of the consortium – the Canada’s Public Sector Pension Investments Board (PSP Investments) and Singapore’s GIC fund.

Both funds will inject an additional $100 million to acquire Macquarie’s share of the fund and take their investments to $400 million each, The Australian Financial Review reported.

According to Mark Wist, senior asset consultant at Atchison Consultants, the Australian market is appealing to offshore funds due to its “high yield structure, good market transparency, governance systems and the fact that it is well researched”.

In addition, while the Australian dollar has strengthened against many currencies, particurlarly the US dollar, which has “crushed” American investment, Wist points out that it has not be as strong against either the Canadian or Singapore dollar.

The decision by the two funds to up their stakes in the Charter Hall Office REIT follows Chinese conglomerate HNA Group’s purchase of 1 York Street for $117 million from Colonial First State and the Canada Pension Plan Investment Board paying $455 million for a half share of the Northland Shopping Centre in Melbourne.

The latest investments are small change for the two sovereign funds – GIC has more than $100 billion invested in global assets while PSP Investments has $55 billion of assets under management.

The consortium still has an offer on the table for the office trust after upping its bid earlier in October by 4¢ to $2.43 per unit, equating to a 7.6% discount to pro forma net tangible assets or a 4.9% discount to gross asset value as of June 30 2011.

It follows an August bid by the then Macquarie Capital Group-led consortium for the listed office trust of $2.39 per unit. This equates to $3.52 per unit when including the expected return from the sale of the trust’s US office portfolio to Beacon Capital Partners for $1.71 billion, which will conclude in May 2012.

The revised October bid includes an option to conclude the Australian sale before the US sale completes.

The Charter Hall Office REIT comprises 18 investment-grade office buildings in Australia, including flagship properties 1 Martin Place and the Citigroup Centre in the Sydney CBD, and was valued at $1.9 billion in its 2011 annual report.

Macquarie will remain an advisor to the consortium.

In July this year, the Charter Hall group won approval to continue to manage the Charter Hall Office A-REIT after unit holders voting overwhelmingly against a resolution for a management takeover by a consortium of hedge funds.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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