Charter Hall fund makes sale to aid redemptions

Selling the $80m Sydney block will help speed investor payments in the $2.5bn unlisted trust.

The asset is fully leased to UNSW with a triple net lease and fixed annual increases.

An unlisted Charter Hall property fund that had delayed meeting investor redemptions has sold a university building in the inner Sydney suburb of Kensington for $80m, showing a small loss.

Unlisted property trusts have come under pressure as office and shopping centre values fall and income falters due vacancies and the higher cost of finance.

Many of the largest property players have built up substantial unlisted property funds businesses and they have been hit with redemption requests from both mum-and-dad investors and superannuation funds.

Charter Hall’s Direct PFA fund sold its leasehold interest in a UNSW Kensington purpose-built and administration facility two years after buying it from a Korean fund for $80.15m.

The block at 221-227 Anzac Parade in Kensington, is leased by the University of New South Wales, with nine years remaining on the existing lease.

The seven-storey building was completed in 2005 and comprises 10,685 sqm of lettable area on a 2466 sqm site. It is directly opposite the main UNSW Kensington campus, near the UNSW Anzac Parade Light Rail Station, on the new Sydney CBD & South East Light Rail line.

The asset is fully leased to UNSW with a triple net lease with fixed annual increases of 3 per cent and multiple option terms.

It is believed a fund managed by Singaporean group Keppel bought the asset but this could not be confirmed.

The transaction was brokered off-market by Peter Court and Mike Walsh of Cushman & Wakefield.

Charter Hall Direct chief executive Steven Bennett said the sale was “in line with our portfolio curation strategy”. He said that PFA offered investors liquidity windows every five years.

“PFA accepted all redemption requests received in response to its most recent liquidity event and will meet those requests in full in an orderly and progressive manner,” he said.

Charter Hall earlier this month blamed tough conditions in the office market for delays as it meets redemption requests in the $2.5bn unlisted office fund focused on government buildings.

The market is dealing with multiple interest rate rises just as big landlords attempt to offload billions of dollars worth of towers and buyers are increasingly wary about the shift to hybrid working.

Charter Hall has held the line against heavy writedowns on its assets, arguing that high-grade towers will benefit from a flight to quality buildings by corporate Australia.

The trust met about 25 per cent of the redemption requests by selling a stake in a western Sydney property earlier this year but delays had hit the remaining 75 per cent portion of redemption requests.

Charter Hall’s direct funds typically take up to 12 months to fund liquidity windows and the PFA Fund had returned more than 10 per cent annually since inception.

Charter Hall shares jumped by 59c to $11.58 on Thursday.