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Australian grandee fund manager to adopt ‘club’ structure

Charter Hall, the Australian property fund manager established in 1991, is meeting investors’ concerns by giving them greater control over its freshly-launched Charter Hall Special Situations Office fund.

Charter Hall, the Sydney-based firm, has launched an opportunistic fund with a ‘club style’.

The firm wants to raise $200-$400 million for Charter Hall Special Situations Office Fund, but the company will adopt a club structure for the unlisted vehicle, it says.

The club will consist  of a smaller number of large investors rather than a large pool of smaller investors, giving LPs the ability to have a say in key investment decisions –a departure from the traditional fully discretionary pools of capital typical of opportunity funds.

The firm said: “The current market has shown that LPs want to be ‘closer’ to the assets they own and managers’ decision making process.”

Charter Hall is viewed as an established player in Australia having been founded in 1991. It manages around $3.4 billion of property for Australian pension funds and other institutional investors.

The timing of the fund is designed to coincide with what it calls “favourable pricing opportunities” created by the dislocation of domestic credit markets.

It believes the office fund could deliver IRRs of more than 15 percent net of fees and expenses and hopes to get commitments from overseas investors as well as domestic LPs.

According to the firm, office properties can be acquired below historic values and replacement cost. The new fund will target offices with long term leases, credit worthy tenants, minimal capital expenditure and some fixed annual rent reviews. The firm points out that Australia is experiencing a 20-year high in population growth. At the same time, the country’s infrastructure is being updated.

The fund sponsor will commit a minimum of $15 million.

Though Charter Hall has launched the fund, it has not been without difficulties arising out of the credit crunch. It has been cutting debt and streamlining senior staff.

In May the Australian shopping centre entrepreneur John Gandel took a 15 per stake in Charter Hall to give it increased equity. Gandel also made other investments in the group such as acquiring $30 million units of the core plus office fund.

Two months later, the firm announced chief financial officer Peter Roberts had been replaced by corporate development director, Jelte Bakker. Bakker previously worked at Macquarie Bank, where he helped Charter Hall on its IPO on the Australian stock exchange in 2005. 

Also in July, the firm revealed a 64 percent write-down of its flagship $1.4 billion core-plus office fund in the six months to June.

It added that within its opportunity funds conditions remained challenging for development and re-positioning of assets dues to tight credit markets, reductions in net asset values and falling demand for commercial space because of the economic downturn.