CHARTER HALL BUYS COLES HEAD OFFICE AND CAMPBELLTOWN MALL

CHARTER Hall Group (ASX: CHC) has bought half of the Coles Melbourne head office the day after announcing its purchase of the Campbelltown Mall for $197 million in partnership with MTAA Super.

The Sydney-based company has put $70.25 million towards the $140.5 million off-market purchase of the Hawthorn East building, with the other half bought by an unnamed private investor.

The building is wholly leased by Coles until 2030 and includes 39.399 sqm in office space. The price represents a 5.8 per cent yield.

The groups has an investment strategy to "acquire high-quality commercial real estate on long leases to high quality covenants in core metropolitan markets". This purchase is likely to form part of a new or existing portfolio prior to settlement during the 2017 March quarter.

Charter Hall Managing Director and Group CEO, David Harrison, says, "Should the asset not be settled in the March 2017 quarter by a Charter Hall managed fund, the Group will use cash and debt to settle the acquisition, which would be slightly accretive to the Group's operating earnings and WALE in FY17, however the intention is to have a managed fund complete the transaction. In order to maintain investment capacity, the Group has extended its headstock Westpac debt facility to $200 million to accommodate the possibility of the transaction being settled by the group."

In regards to the Campbelltown Mall purchase, Charter Hall will manage the partnership, to be known as the Charter Hall Prime Retail Fund (CPRF) and will contribute $46 million to the purchase, representing a 38 per cent investment geared at 45 per cent.

However, the Sydney-based company plans to reduce its stake to 10 per cent by attracting more investors into the new fund.

The property is anchored by Coles, Woolworths, Kmart, Target and Aldi and has a further 10 'mini majors' and 84 specialty tenancies. It has 98 per cent occupancy and a 4.7-year weighted average lease expiry.

The centre has a gross lettable area of more than 42,200 square metres on a 7.2 hectare site with parking for 1,788 vehicles.

Charter Hall head of retail, Greg Chubb, says, "The property is the seed asset for CPRF, which will focus on acquiring and actively managing larger convenience based retail centres with strong growth potential via leveraging Charter Hall's extensive retail management platform," says Chubb.

Charter Hall wholesale fund manager, Ben Ellis, says the property satisfies the strategy of acquiring larger convenience-based retail assets located in metropolitan areas with favourable demographics.

"As the outer metropolitan areas of our major cities become more urbanised, traditional sub-regional non-discretionary shopping centres are providing a renewed and strong growth investment opportunity, as density and population increases," he says.

"Campbelltown Mall is uniquely positioned to benefit from its location in the Macarthur region, which is forecast to increase retail expenditure, in the main trade area, at an average annual rate of 3.8 per cent per annum to 2026."

The mall was acquired in an off-market transaction that was advised by JGS property and delivers a market capitalisation rate of 6 per cent.

The purchase is expected to complete in October.

The Charter Hall share price is up 3.06 per cent this afternoon at $5.39 per share.