Charter Hall successfully raises $120M to fund new centre acquisitions

Charter Hall successfully raises $120M to fund new centre acquisitions

by Jason Roberts

March 26, 2019

Charter Hall Education Trust, formally known as Folkestone Education Trust, has confirmed the successful placing of $120 million of new units to fund the acquisition of 13 new purpose-built early childhood education and care centres.

 

The acquisitions come in the wake of the company reporting a reduction in the number of sites contracted in its development pipeline to just one centre when it reported results on 14 February 2019, and will serve to significantly replenish the pipeline going forward.

 

In a presentation released yesterday to provide detail on the transaction, the company disclosed that the centres are located across three states with three in Victoria, one in New South Wales and the balance in Queensland. Two of the centres have been completed and are operating and the remaining 11 sites will be purchased once construction has been completed.

 

Of these 11 sites, six will be subject to what is referred to as a ‘fund through’ arrangement whereby Charter Hall will own the land but provide capital to the developer to complete the centre build. The developer will be expected to pay interest of 7.25 per cent on the capital provided and also fund any cost overruns. On completion, Charter Hall will own the asset. In this instance, the developer is Gold Coast-based CCLP Consulting.

 

In terms of value, Charter Hall is paying an average of $5.9 million each for the two completed centres; $6.76 million each for the five centres being delivered mid-year; and, $4.98 million each for the six centres subject to a ‘pass through’ arrangement – although it is unclear if it is net or gross of interest to be received.

 

The centres have been fully leased to four operators: G8 Education, Little Seeds Early Learning, Harmony Early Learning and Nino Early Learning Adventures.

 

The total value of the centres to be acquired is $75.5 million.

 

The company originally targeted a $100 million capital raise but given strong demand increased the size of the deal to $120 million with the additional proceeds raised being used to pay down debt.

 

Charter Hall currently has 413 centres in its portfolio. It is Australia’s largest real estate investment trust (REIT) with an early education focus. It owns centres across Australia with its largest exposures in Queensland, Victoria and New South Wales. Goodstart Early Learning is currently its largest tenant in terms of annual rent received, followed by G8 Education and Only About Children.

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