Charter Hall has successfully launched a new project – Office Trust No. 2 (CHOT2). CHOT2 is a fixed-term, unlisted real estate partnership fund focused on investing in two high-quality office properties located in Australia’s core CBD – Brisbane and Adelaide.
Investing in these two office buildings presents a rare and compelling opportunity, with a strong market outlook, high-quality tenants, and long-term return potential. Below are the highlights of the underlying
Strong Investment Return Expectations
- Annualized Return: The five-year target annualized return is over 17% (including an average distribution yield of 7.2% p.a. over 5 years), offering investors a significant income growth opportunity.
- Initial Passing Yield: The initial passing yield for these two CBD office properties is approximately 6.7%. In the current market environment, this yield is significantly higher than many comparable assets. With rental growth projected year-on-year, investors can expect even more attractive returns in the future.
Discount to Net Asset Value (NAV) Advantage
The price of these two office properties is being offered at an 8.8% discount to their Net Asset Value (NAV). This discount implies that you are acquiring these properties below their net asset value, which enhances the attractiveness of the investment. By purchasing assets at a discounted price relative to NAV, investors stand to benefit from a higher potential return, especially if the market recovers or the asset value appreciates, thereby generating greater upside potential.
Below Replacement Cost Opportunity
The purchase price of these properties is 35% below replacement cost, meaning they are being acquired at a significant discount compared to the expense of building similar facilities today. This offers a unique opportunity to secure high-quality assets at exceptional value, with potential for long-term appreciation.
Quality Tenant Base
- Brisbane (275 George Street): Positioned in the CBD’s “Golden Triangle,” with a 99.4% tenant occupancy rate. Key tenants include the Australian and Queensland State Governments, Shell, and Telstra, ensuring predictable and reliable rental income.
- Adelaide (10 Franklin Street): Located centrally near public amenities, this property boasts a 100% occupancy rate, with major tenants like BHP and the South Australian Government.
Both properties benefit from low vacancy risk due to their prestigious locations and long-term leases with government and blue-chip tenants.
Long-Term Lease and Stable Income Growth
- Brisbane has a weighted average lease expiry (WALE) of 5 years, while Adelaide has a WALE of 5.9 years. This indicates long-term lease contracts, providing investors with stable and predictable returns.
- The properties have annual rent reviews with a guaranteed 3.5% increase, effectively countering inflationary pressures and ensuring continued rental growth.
Why Invest in These Office Properties Now?
Based on the Chater Hall research, the current market cycle presents a rare opportunity to invest in high-quality assets during a market downturn, benefiting from supply shortages and strong demand.
- The combination of long-term, stable rental income predetermined rental growth, and low vacancy rates makes these properties an investment option for consideration.
- With a target annualized return of over 17%, these properties offer a compelling return, significantly outpacing other market options.
About Charter Hall
Founded in 1991 and headquartered in Sydney, Charter Hall is one of Australia’s leading real estate investment and fund management companies. The group manages AUD 29.3 billion in funds across 96 properties, making it one of Australia’s largest CBD office property managers. Charter Hall focuses on investment and management in core property sectors such as office, industrial, retail, and social infrastructure. As of 2024, Charter Hall manages assets totaling over AUD 80.9 billion, servicing more than 45,000 investors and tenants. Notable office properties include No1 Martin Place, The Glasshouse, and 737 Bourke Street, among others. In 2019, Charter Hall acquired a premium CBD site at 201 Elizabeth St in Sydney for AUD 630 million. The group also owns retail assets such as Campbelltown Mall, Eastgate Bondi Junction, and Pacific Square Shopping Centre.