Charter Hall exit just a reshuffle, says John Gandel

John Gandel says his exit from Charter Hall is not a peak-of-the-market exit strategy.

John Gandel carries great weight in the property industry.

John Gandel, one of Australia’s most influential property investors, yesterday quashed concerns his near $500 million shock selldown from Charter Hall Group and its subsidiary retail landlord, Charter Hall Retail REIT, reflected a peak of the market exit ­strategy.

The Melbourne-based entrepreneur and founder of the Gandel Group said his abrupt departure yesterday from the listed landlord and funds manager was part of a portfolio overhaul and did not represent a funding drive for the Chadstone shopping centre, which is undergoing a $660m expansion.

Mr Gandel told The Australian he had held the 19 per cent stake in Charter Hall Group for more than five years. “Every now and then you have to shuffle the deck and take a look around,” he said. “We felt it was time.

“We are a bit multifaceted as a group.” He said the investment portfolio included shares in global companies and other assets.

But Mr Gandel, who has a net worth of $US3.7 billion ($4.8bn) according to Forbes magazine, carries great weight in the property industry and his decision to cash in his chips on a punt he took in the depths of the global financial crisis comes at a time when some in the market are warning valuations look overheated.

In a research note published by Credit Suisse this week, analysts Ian Randell, Mikhail Mohl and Martin Patz say Charter Hall Group traded at a 71 per cent premium to its net tangible asset value and delivers a return of 9 per cent, which they described as “lowest total return in our REIT coverage universe”.

Yet many investors remain unfazed by Mr Gandel’s exit.

Stephen Hiscock, managing director of specialist property funds management firm SG Hiscock & Co, said he viewed the trade as “neutral” and praised Mr Gandel for his canny timing.

He added that while Charter Hall looked relatively expensive, its lofty trading multiples reflected the group’s “intangible income streams”.

Mr Gandel first waded into the $2.2bn real estate funds manager in 2009 when the fallout from the collapse of Lehman Brothers was at its fiercest. By leaping in at the nadir of the cycle and then exiting when the market returned to heights last seen at the peak of last decade’s credit boom, he maximised his profits. Investors estimate he had reaped three times his money, excluding dividends.

Macquarie Capital executed and fully underwrote the $396m selldown from Charter Hall as well as the $92m rotation out of satellite Charter Hall Retail REIT. The units in each entity were sold to third party investors.

The trade out of the parent group failed to attract a premium and instead was priced at close to the floor price of $5.

The Charter Hall Retail selldown was set at a fixed price of $4.02, a 3.5 per cent discount to the last close.

While the Gandel exit had been long planned, those close to the deal said the timing might have been spurred by an uptick in the stock price ahead of the launch of the $1.25bn Charter Hall Long WALE REIT.

Fund managers have bid up the head stock as they have sought allocations in the forthcoming float.

Although proceeds of his Charter Hall exit may not be ­directly applied to Chadstone, Mr Gandel’s investment in the Melbourne icon is significant.

Gandel Group’s core holdings, an investment in the half share of Chadstone and the stake in Vicinity Centres, totalled just over $4.5bn, Mr Gandel said.

Close observers of Gandel operation said the Charter Hall stake, which began with an $82m investment in the company and its funds in 2009, had not been a core holding.

In a letter posted to the exchange, Mr Gandel paid tribute to Charter Hall chief executive David Harrison, as well as co-founders David Southon and Cedric Fuchs, in growing the business to a $17.5bn property group.

“We are pleased to have contributed to the development of CHC and its strategy and believe the business is well placed to continue its success,” the letter says.

Investment managers noted Mr Gandel’s timing in getting into and then exiting from Charter Hall.

“He certainly timed the buying brilliantly. History will tell us whether the selling was spot on as well,” said Antares Equities investment manager Brett McNeill.

Mr Gandel emphasised his commitment to Vicinity Centres. The Melbourne property baron has put his stamp on the company, in which he has a 17.25 per cent stake.

He backed the friendly merger of Federation Centres and Novion early last year. Chief executive Steven Sewell two months later left the group, the group, rebranded Vicinity.

Mr Gandel’s influence was seen as critical in the switch back to ex-Colonial executive Angus McNaughton. Vicinity is now seen as a more conservative outfit. “It’s a very Melbourne sort of company now,” one investment banker said.

Additional reporting: Ben Wilmot