Charter Hall weighs up Perth sale as redemption delay eases

A Charter Hall fund is selling the Djookanup complex in the Perth, once known as the Optima Centre.

Property funds group Charter Hall is weighing up a sale of a Perth office block that could help it pay out investors exiting its unlisted Direct PFA Fund.

The $2.5bn fund had pushed back the timing of payments to investors after its plans to sell office blocks were delayed due to the slow investment market, prompting wider concerns about the unlisted property sector.

But Charter Hall has insisted it will be able to pay investors by year’s end and will not take deep discounts on high-quality assets.

The Charter Hall fund is selling the Djookanup complex in the Perth suburb of Osborne Park. The A-grade campus-style office complex is under due diligence by another property group, Castlerock, at about $126m, in keeping with its purchase price.

The fully leased, two-building office campus has 16,116sq m of office space and occupies a 9459sq m site 5km from Perth’s CBD.

The Charter Hall fund teamed with the group’s listed long-leased vehicle to buy the Perth office block, then called the Optima Centre, from US manager BlackRock for $126.2m in 2018.

The parties and agents Cushman & Wakefield and CBRE declined to comment.

The impending sale shows that office markets are increasingly liquid and managers are prepared to accept market pricing on more secondary assets as part of their strategies.

Charter Hall has argued that top-end assets will retain their value in this tough part of the cycle as high interest rates and the shift to hybrid work hurt lower-grade offices.

The impending sale of the Perth building shows that the suburban office market will revert to more normal values after an elevated period in which pricing approached that of some city towers.

But it shows that investors are still after suburban buildings that will remain as offices even as other capital city blocks are assessed for redevelopment as residential sites.

The experience of working from home differs vastly across the country, with Western Australia less affected because of shorter lockdowns and the recovery in its office market.

In July, Charter Hall blamed tough conditions in office markets for delays in meeting redemption requests in the $2.5bn unlisted office fund, which is focused on government buildings.

The market has been hit by multiple interest rate hikes just as big landlords are attempting to offload billions of dollars worth of towers. But deals have been struck by Dexus, Mirvac and Investa.

The Charter Hall Direct PFA Fund flagged in July that it may pay out a portion of redemption requests made in late 2022 as part of a five-year liquidity window next year.

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

At the end of July, the fund sold a university building in the inner Sydney suburb of Kensington for $80m, showing a small loss. The asset, in Herdsmen Business Park, was completed in 2010.