Apollo, AREA bid for Charter Hall’s $1.68bn US office portfolio

The two New York private equity real estate firms are vying to buy a US portfolio of 14 offices from the Sydney-based real estate fund manager’s Charter Hall Office REIT after its hedge fund investors reportedly pushed for a sale.

Apollo Global Management and AREA Property Partners have submitted bids for all or parts of the US portfolio within the Charter Hall Office REIT, a A$3.63 billion (€2.72 billion; $3.87 billion) office portfolio listed on the Australian Stock Exchange which also includes Australian offices.

According to multiple news reports, Apollo has teamed up with fellow New York firm Broadway Partners to bid more than $1.68 billion for the REIT’s 14 US offices, while AREA, Boston Properties and Highwoods Properties have made bids for all or parts of the 8.2 million square foot portfolio.

The bids form the second phase of a strategic review of the assets by Bank of America Merrill Lynch which started more than three months ago. On 18 May, Charter Hall said it completed the first phase which included the receipt of initial non-binding expressions of interest in the assets. As part of the review, the assets will be re-valued independently on 30 June. Charter Hall’s valuation for the assets in December 2010 was A$1.675 billion.

The properties, in which the REIT owns total or majority stakes, are situated across the US including in Los Angeles, San Diego, Denver and Boston. They are 82 percent-occupied and have a weighted average unexpired lease length of 5.8 years. Tenants include the Australian Government, Macquarie Group, Telstra, JP Morgan Chase, Wells Fargo Bank and AT&T.

It is the second time this year that Apollo has bid for US properties held by an Australian manager having also bid for Sydney-based Centro Property Group’s US retail assets in March. Those ultimately were sold to The Blackstone Group in a deal valued at $9.4 billion, one of the largest transactions since the global financial crisis.

According to a report by Bloomberg, the sale of Charter Hall’s US offices has been pushed by a number of the REIT’s US hedge fund investors including Orange Capital, Luxor Capital, Point Lobos Capital and Long Pond Capital, which own 18 percent of the entire REIT. Bloomberg cited three sources with knowledge of the matter.

The REIT has been selling its interests in markets it now considers as non-core including a A$42 million office in Japan, according to Reuters.