The Charter Hall Group (ASX: CHC) share price will be on watch on Tuesday after the release of an announcement.
What did Charter Hall announce?
This morning Charter Hall announced that a consortia of Charter Hall managed funds and partnerships has exchanged contracts to purchase the David Jones flagship Elizabeth Street store in Sydney.
According to the release, the parties have agreed a purchase price of $510 million.
The iconic Sydney central business district (CBD) property comprises 12 levels on a strategic 3,530sqm prime CBD retail site, prominently located overlooking Hyde Park with views to Sydney Harbour.
Management notes that David Jones, as its vendor, has in recent years completed a significant capital works program which has created a world class showcase of department store retailing.
What are the financial impacts?
The release explains that Charter Hall acquired the property on a sale and leaseback transaction with David Jones. The retailer will provide a 20-year, triple-net (NNN) lease, with a minimum 2.5% per annum annual rent increases supplemented by an agreed turnover rent linked to sales performance.
Settlement is conditional upon approval from the Foreign Investment Review Board for David Jones entry into the lease.
The purchase price of $510 million reflects a 5% initial yield based on the initial annual net rent of $25.5 million. This reflects approximately $800 per sqm of lettable area.
Charter Hall’s CEO and Managing Director, David Harrison, believes the acquisitions ticks a lot of boxes.
He said: “This acquisition is consistent with our strategy in so many ways, namely: securing long WALE NNN leased assets, combining the appetite of our managed funds and partnerships to partner with the Group on high conviction prime real estate acquisitions, co investing Group capital alongside our partners to secure attractive earnings growth from our Property Investment portfolio, whilst also expanding the Group’s FUM platform.”
“Combined with other recently announced acquisitions and pre-leased development projects across office and industrial sectors, we expect the Group’s FUM to exceed $45 billion as at 31 December 2020,” concluded Mr Harrison.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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